Here, we'll provide a detailed explanation of how OHLC values are derived for a combined premium chart on a minute-by-minute basis, using a hypothetical example based on the premiums of call (CE) and put (PE) options with a strike price of 44,000 (Banknifty).
The Combined Premium of both the call and put options is calculated by adding their respective premiums. It's important to note that the premium of call options tends to increase with a rising underlying asset value, while the premium of put options typically decreases.
Let's illustrate this process with an example:
9:30 AM:
Assume Both CE & PE Premiums open at 100. Combined Premium Opens = 200
Scenario 1:
Underlying Value Increases by +0.25%
Call Option Premium = 150 Put Option Premium = 80 Combined Premium = 230
Scenario 2:
Underlying Value Decreases by -0.25%
Call Option Premium = 70 Put Option Premium = 120 Combined Premium = 190
9:31 AM:
Assume Both CE & PE premiums close at 100 Combined Premium = 200
From the above explanation, we can easily conclude the OHLC of the Combined Premium Chart.
Note: It's worth noting that as the premium of the call option (CE) rises, the premium of the put option (PE) tends to decrease.
Here, when the call option (CE) reaches a high of 150, the put option (PE) experiences a low of 80. Conversely, when the put option (PE) reaches a high of 120, the call option (CE) registers a low of 70.
Based on these scenarios, we can determine the OHLC values for the Combined Premium Chart:
Open (O): The opening value is the sum of the initial premiums of the call and put options, which is 200.
High (H): The highest point in the combined premium during the minute is determined by considering the high premium of the call option (150) and the low premium of the put option (80), resulting in a high of 230.
Low (L): The lowest point in the combined premium during the minute is determined by considering the high premium of the put option (120) and the low premium of the call option (70), resulting in a low of 190.
Close (C): The closing value is once again 200, as both the call and put options closed at 100 each.
In summary, OHLC values for the Combined Premium Chart are as follows:
Open (O): 200
High (H): 230
Low (L): 190
Close (C): 200
This OHLC data provides a concise representation of the minute-by-minute fluctuations in combined premium values, enabling traders and analysts to assess market dynamics and option pricing changes.