Dear Gurus,
I have been trying to find this thing for a long time but haven't been able to reach a conclusion. I want to know if the time value of an option increase as time passes? I know it decreases but i want to know what circumstances can cause a time value to increase?
Eg. I am taking a simple example where there are only intrinsic and extrinsic(time) values for the given options. Nifty is trading at 6100 and 6000 call is 150(100 intrinsic and 50 time value) while 6200 put is 105(100 intrinsic and 5 time value), there is a bullish anticipation but all of a sudden there is bad news and nifty moves to 5900, under these circumstances if the time that was constant will introduce a 'more' time value on the 6200 put?
Thanks for the comments.
I have been trying to find this thing for a long time but haven't been able to reach a conclusion. I want to know if the time value of an option increase as time passes? I know it decreases but i want to know what circumstances can cause a time value to increase?
Eg. I am taking a simple example where there are only intrinsic and extrinsic(time) values for the given options. Nifty is trading at 6100 and 6000 call is 150(100 intrinsic and 50 time value) while 6200 put is 105(100 intrinsic and 5 time value), there is a bullish anticipation but all of a sudden there is bad news and nifty moves to 5900, under these circumstances if the time that was constant will introduce a 'more' time value on the 6200 put?
Thanks for the comments.