Why is there no price movement in the stock’s option contracts when the price of the stock and its futures contract is moving?
The price movement only occurs if there is trading activity in a stock or a contract. If there is no price movement for the options contract even though the underlying stock and future contract are moving, it means that the option contract is not actively traded. The trading activity of any instrument can be checked by seeing the Last Traded Time (LTT). The LTT displays the time when a particular share or contract was last bought or sold.
To see the LTT of any instrument, open the market depth of an instrument.
There might be fluctuation in the bid and offer or chart of an instrument even though it’s not traded due to the following reasons:
- Bid and offer - The bid and the offer prices could be moving, but the Last Traded Price (LTP) would not have moved at all. This is because the top 5 bid and ask prices are displayed in the market depth window at all times by default, even if there is no trading activity in the instrument.
- Charts - The charts generally show dashes for a particular option contract until trades happen, after which the candles are formed. Even if the bid and offer prices for the contract are moving, charts only capture the LTP; hence LTT needs to be checked to see the trading activity in a particular contract. To learn more, visit zerodha.com/varsity/chapter/chart-types.