CACP, which recommends MSP, is again not a statutory body and its just an office attached to Ministry of Agriculture. CACP just recommends MSP but the decision on fixing and even not fixing 👇
POINTS RELATED TO #MSP
1) MSP does not have any legal backing till now and farmers can't demand it as a right. Its just government policy and an administrative decision to purchase food grains at MSP. And govt can't even force private players to provide MSP. 👇
CACP, which recommends MSP, is again not a statutory body and its just an office attached to Ministry of Agriculture. CACP just recommends MSP but the decision on fixing and even not fixing 👇
See there are two things, ONE is declaration of MSP and the SECOND is procurement of food grains at MSP by Govt. Agencies. The declaration of MSP has no meaning (its worthless) if Govt. agencies are not procuring at MSP. 👇
2) Why farmers are scared about the agri reforms???👇
Procurement at MSP of only wheat and rice from Punjab and Haryana has totally distorted agriculture production, resulting in Soil degradation👇
4) The Essential Commodities Act 1955 mentions sugarcane and sugar as essential commodities and through that Act, 👇
5) Its like Central govt and State govt combined is giving more than Rs. 3 lakh crore every year as subsidy to farmers like MSP, urea, electricity, water, purchase of equipments etc. etc👇
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Ok here is the explanation. Grab a cup of coffee and read on. If you have not read/noticed this, you will see intraday options movement in a new light.
Say we have two options, one 50 delta ATM options and another 30 delta OTM option. Normally for a 100 point move, the ATM option will move 50 points and the OTM option will move 30 points. But in a high volatile environment, the OTM option will also move nearly 50 points
To understand why this happens, first understand why an ATM option is 50 delta. An ATM option has the probability of 50% of expiring as ITM. The price just has to close a rupee above the strike for the CE to be ITM and vice versa for PEs
Now think of a highly volatile day like today. If someone is asked where the BNF will close for the day or expiry, no one can answer. BNF can close freakin anywhere, That makes every option of an equal probability of being ITM. So all options have a 50% probability of being ITM
Hence, when a huge volatile move starts, all OTM options behave like ATM options. This phenomenon was first observed in the Black Monday crash of 1987 at Wall Street, which also gave rise to the volatility skew/smirk
In a high IV environment or when the market is very volatile
— Subhadip Nandy (@SubhadipNandy16) January 21, 2022
" OTM options will behave like ATM options", one will get almost the same delta movement
Say we have two options, one 50 delta ATM options and another 30 delta OTM option. Normally for a 100 point move, the ATM option will move 50 points and the OTM option will move 30 points. But in a high volatile environment, the OTM option will also move nearly 50 points
To understand why this happens, first understand why an ATM option is 50 delta. An ATM option has the probability of 50% of expiring as ITM. The price just has to close a rupee above the strike for the CE to be ITM and vice versa for PEs
Now think of a highly volatile day like today. If someone is asked where the BNF will close for the day or expiry, no one can answer. BNF can close freakin anywhere, That makes every option of an equal probability of being ITM. So all options have a 50% probability of being ITM
Hence, when a huge volatile move starts, all OTM options behave like ATM options. This phenomenon was first observed in the Black Monday crash of 1987 at Wall Street, which also gave rise to the volatility skew/smirk
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