Options Premium Decay (Paisa Algo)

Nov 20

📜 Option Premium Analysis (Paisa Algo): Key Concepts

Option Premium Analysis is the process of evaluating the price (premium) of an options contract that a trader pays in advance to enter the contract.
Analyzing the premium is crucial as it significantly affects the potential returns on the contracts and helps in deciding the appropriate trading strategy.

Factors Affecting Premium Price
The option premium is influenced by several factors:
Intrinsic Value: The difference between the underlying asset's current market price and the strike price. It is always positive or zero, never negative.
Time Value (Extrinsic Value): Represents the potential for the contract's value to change before expiry. This value decays as the expiry date approaches, a phenomenon known as
Option Premium Time Decay Analysis.
Volatility: Higher volatility in the stock price leads to higher premiums.
Rate of Interest: A higher rate of interest suggests higher premiums.
Dividends: The payment of dividends can significantly impact option pricing, especially for call options, as the holder is not entitled to the dividend
Underlying Asset Price: Changes in the underlying asset's price can impact the options premium.

Calculation Methods
Two popular methods for calculating the options premium and its decay are the Black-Scholes model and the Binomial model.

📊 "Options Premium Decay (Paisa Algo)" Indicator

This is a technical indicator written in Pine Script designed to visualize and alert on the decay or change in premium of a selected range of Call (CE) and Put (PE) options for a given underlying asset (like NIFTY).

Key Functionality

Focus: It performs Option Premium Decay Analysis by measuring the rate of decline in the value of an options contract due to the passage of time.
Input Parameters:
Symbol: The underlying asset (e.g., `NSE:NIFTY`).
Expiry Dt: The expiration date for the options contracts.
Strike Range: Defined by `Strike` (lower), `Strike` (upper), and `Strike Diff`.
Calculation:
It auto-generates option tickers for the specified strike range and expiry date.
It requests the closing price (`close`) for each Call (CE) and Put (PE) option contract within the range.
It calculates the change since the open for the total premium of all fetched CE contracts (`ce_decay`) and all fetched PE contracts (`pe_decay`).
Output Visualization:
It plots the CE Decay (green/teal) and PE Decay (red) lines, showing the change in the total premium since the start of the session.
It displays percentage badges on the right edge of the chart to show the relative contribution of CE and PE decay to the total absolute decay sum.
It includes a `0` line for reference.
Alerts and Markers: The indicator generates alerts and places on-chart markers for specific conditions:
Decay Cross: When the CE and PE decay lines cross.
Both At Zero: When both CE and PE decay values are near zero.
Both Below Zero: When both CE and PE decay values are negative

Nov 20

Release Notes

📜 Option Premium Analysis (Paisa Algo): Key Concepts

Option Premium Analysis is the process of evaluating the price (premium) of an options contract that a trader pays in advance to enter the contract.
Analyzing the premium is crucial as it significantly affects the potential returns on the contracts and helps in deciding the appropriate trading strategy.

Factors Affecting Premium Price
The option premium is influenced by several factors:
Intrinsic Value: The difference between the underlying asset's current market price and the strike price. It is always positive or zero, never negative.
Time Value (Extrinsic Value): Represents the potential for the contract's value to change before expiry. This value decays as the expiry date approaches, a phenomenon known as
Option Premium Time Decay Analysis.
Volatility: Higher volatility in the stock price leads to higher premiums.
Rate of Interest: A higher rate of interest suggests higher premiums.
Dividends: The payment of dividends can significantly impact option pricing, especially for call options, as the holder is not entitled to the dividend
Underlying Asset Price: Changes in the underlying asset's price can impact the options premium.

Calculation Methods
Two popular methods for calculating the options premium and its decay are the Black-Scholes model and the Binomial model.

📊 "Options Premium Decay (Paisa Algo)" Indicator

This is a technical indicator written in Pine Script designed to visualize and alert on the decay or change in premium of a selected range of Call (CE) and Put (PE) options for a given underlying asset (like NIFTY).

Key Functionality

Focus: It performs Option Premium Decay Analysis by measuring the rate of decline in the value of an options contract due to the passage of time.
Input Parameters:
Symbol: The underlying asset (e.g., `NSE:NIFTY`).
Expiry Dt: The expiration date for the options contracts.
Strike Range: Defined by `Strike` (lower), `Strike` (upper), and `Strike Diff`.
Calculation:
It auto-generates option tickers for the specified strike range and expiry date.
It requests the closing price (`close`) for each Call (CE) and Put (PE) option contract within the range.
It calculates the change since the open for the total premium of all fetched CE contracts (`ce_decay`) and all fetched PE contracts (`pe_decay`).
Output Visualization:
It plots the CE Decay (green/teal) and PE Decay (red) lines, showing the change in the total premium since the start of the session.
It displays percentage badges on the right edge of the chart to show the relative contribution of CE and PE decay to the total absolute decay sum.
It includes a `0` line for reference.
Alerts and Markers: The indicator generates alerts and places on-chart markers for specific conditions:
Decay Cross: When the CE and PE decay lines cross.
Both At Zero: When both CE and PE decay values are near zero.
Both Below Zero: When both CE and PE decay values are negative

Nov 20

Release Notes

📜 Option Premium Analysis (Paisa Algo): Key Concepts

Option Premium Analysis is the process of evaluating the price (premium) of an options contract that a trader pays in advance to enter the contract.
Analyzing the premium is crucial as it significantly affects the potential returns on the contracts and helps in deciding the appropriate trading strategy.

Factors Affecting Premium Price
The option premium is influenced by several factors:
Intrinsic Value: The difference between the underlying asset's current market price and the strike price. It is always positive or zero, never negative.
Time Value (Extrinsic Value): Represents the potential for the contract's value to change before expiry. This value decays as the expiry date approaches, a phenomenon known as
Option Premium Time Decay Analysis.
Volatility: Higher volatility in the stock price leads to higher premiums.
Rate of Interest: A higher rate of interest suggests higher premiums.
Dividends: The payment of dividends can significantly impact option pricing, especially for call options, as the holder is not entitled to the dividend
Underlying Asset Price: Changes in the underlying asset's price can impact the options premium.

Calculation Methods
Two popular methods for calculating the options premium and its decay are the Black-Scholes model and the Binomial model.

📊 "Options Premium Decay (Paisa Algo)" Indicator

This is a technical indicator written in Pine Script designed to visualize and alert on the decay or change in premium of a selected range of Call (CE) and Put (PE) options for a given underlying asset (like NIFTY).

Key Functionality

Focus: It performs Option Premium Decay Analysis by measuring the rate of decline in the value of an options contract due to the passage of time.
Input Parameters:
Symbol: The underlying asset (e.g., `NSE:NIFTY`).
Expiry Dt: The expiration date for the options contracts.
Strike Range: Defined by `Strike` (lower), `Strike` (upper), and `Strike Diff`.
Calculation:
It auto-generates option tickers for the specified strike range and expiry date.
It requests the closing price (`close`) for each Call (CE) and Put (PE) option contract within the range.
It calculates the change since the open for the total premium of all fetched CE contracts (`ce_decay`) and all fetched PE contracts (`pe_decay`).
Output Visualization:
It plots the CE Decay (green/teal) and PE Decay (red) lines, showing the change in the total premium since the start of the session.
It displays percentage badges on the right edge of the chart to show the relative contribution of CE and PE decay to the total absolute decay sum.
It includes a `0` line for reference.
Alerts and Markers: The indicator generates alerts and places on-chart markers for specific conditions:
Decay Cross: When the CE and PE decay lines cross.
Both At Zero: When both CE and PE decay values are near zero.
Both Below Zero: When both CE and PE decay values are negative

Nov 21

Release Notes

📘 Indicator Description: Options Premium Decay (Paisa Algo)

The Options Premium Decay (Paisa Algo) indicator is a powerful TradingView tool designed to analyze real-time Call (CE) and Put (PE) premium decay for NSE options. It tracks how option premiums change throughout the trading session and converts that into actionable insights through plots, percentage splits, tables, and alert conditions.

🔍 Core Purpose

The indicator measures:

1️⃣ Total CE & PE Premium Decay

Sums option prices across a range of strikes for both CE and PE.

Tracks how these totals move relative to the day’s market open.

Shows this as “CE Decay” and “PE Decay” lines.

2️⃣ Momentum of Market Bias

By interpreting the premium decay pressure on CE vs PE, the indicator helps identify swings in intraday sentiment:

Higher CE decay = bullish pressure weakening

Higher PE decay = bearish pressure weakening

🧠 How It Works (Simplified)
✔ Automatic Option Symbol Handling

Extracts the underlying (e.g., NIFTY).

Builds option symbols using expiry & strike inputs.

Creates CE/PE symbol lists and caches them.

Uses intelligent caching to avoid TradingView request.security limits.

✔ CE/PE Decay Calculation

For each option strike within your selected range:

Decay = Current Premium – Today’s Opening Premium


Then:

Totals are plotted.

Percent contributions are shown as badges.

✔ Zero Reference Line

You can choose between:

Absolute zero

A dynamic midline based on a recent period (customizable)

📊 What You See on the Chart
1️⃣ CE & PE Decay Plots

Green line → CE Decay

Red line → PE Decay

Shows how premiums fall or rise since the market opened.

2️⃣ Percentage Badges (Right Side)

Displays:

Percentage share of CE decay

Percentage share of PE decay

This shows which side is dominating decay momentum.

3️⃣ Nearest-4-Strike Decay Table (Top-right)

A live table that displays for 4 strikes around ATM:

Strike

CE Decay

PE Decay

CE% contribution

Helpful for scalpers who need granular strike-wise pressure.

🚨 Built-in Alerts

The indicator triggers alerts when important conditions occur:

✔ Decay Cross

CE decay crosses PE decay — signals potential shift in trend.

✔ Both at Zero

Both decays near zero → typically low-volatility or dead zone.

✔ Both Below Zero

CE & PE both strongly negative (below −8) → high decay pressure on both sides.

Each event also places labels on the chart for visual confirmation.

🛠 Other Features

Debug mode to inspect symbol loading issues.

Displays helpful messages when TradingView requires chart refresh.

Handles NSE symbol formatting automatically.

A robust caching system to avoid hitting TradingView limits.

📈 Use-Case Summary

This indicator is ideal for:

✔ Intraday Option Traders

analyzing real-time option premium behavior

✔ Scalpers

who rely on CE-PE decay pressure for directional confirmation

✔ Market Sentiment Readers

who prefer derivatives-based signals over price action