India Investment, Stocks, Credit Card and Retail Forum
Investments in Indian Equity and Research => Derivatives => Topic started by: resh on December 17, 2025, 01:16:56 PM
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Let's say Nifty spot is at 26,000. 5% away it is 24,700 or say 24,500 - Who are Buying these strikes and Why is the big question ?
If some Institutional Investor is sensing Risk of an Event, they usually Buy in Large Quantities as they can't liquidate their portfolio and this is the only means to hedge. But this is not a regular affair. So who else Buys the Deep OTM Options ?
The margin benefits for option writers are so structured that if you Sell 25000 PE and Buy 24500 PE then they will end up locking lower margin. Hence you can imagine the rest of the chain based on their risk assessment, they will end up buying some strike and sell some strike, typically known as "Spreads"
Also the same applies for Ratio's Buy an Inner Hedge and Sell Outer in the ratio of 1:2 or 1:3 based on risk.