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Option Greeks

Theta’s Relationship With Spot And Strike Price

Theta with respect to change in spot price:

 

Assuming the strike to be 16500, days to expiry 17 days and volatility 17%

 

 

When the stock price is very low, Theta is close to zero. For an ATM option, Theta is large and negative. As stock price increases,Theta again tends to move towards zero, but stays negative. 

 

Theta with respect to change in strike price: 

 

Assuming spot to be 16500, days to expiry 17 and volatility 17%

 

 

Value of Theta increases as the option moves from OTM to ATM and decreases as the option moves from ATM to ITM. In other words, Theta is at its peak at ATM and decreases as Nifty moves away.

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Units 15/38