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May 24, 2020 at 5:41 PM #286308
Premium Decay analysis considers 3 strike prices with highest OI. However sometimes during intraday, we see a change in strike prices with highest OI and this affects premium decay calculation significantly. Please advise what shall be done in this scenario.
Thank you for all your teachings.
May 26, 2020 at 10:30 AM #289533
Even when there is a one way move in price whole day, there is decay on only one side (either call or Put) the other side is only increasing. What to do in that case?
May 26, 2020 at 10:31 AM #289525
You have to capture premium for all strike price with regular interval (whatever interval you are following) & refer only 3 strike price with highest OI in OTM (call or put). If any changes happen in strike price with respect to OI, then you already have recorded premium value of the new strike price. For this you have to automate the premium decay system. Or else you may record 5 or 6 strike prices premium with highest OI. In most cases strike prices didn’t go away beyond this limit in intraday basis.
May 26, 2020 at 11:29 AM #288640
1st we need to observe where max oi is change.then we need to observe roc of iv.if it happens in a particular strick price then we can consider that strick price in our premium decay analysis.
2nd we also need to focus 3max oi otm strick price to identify overall trend.
If data change in intraday we can change our strick price.
Nitin Sir can confirm this.I am also a learner.
May 26, 2020 at 11:33 AM #288754
I think we should change the strike price also in our analysis of premium decay.
May 26, 2020 at 11:35 AM #288763
Freshly start considering new strike price where highest open interest is being build and start calculating premium decay
May 26, 2020 at 11:51 AM #289436
As per Nitin sir said in last live streaming , change your strike price accordingly in intraday.
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