Last Traded Price (LTP) is the most recent price at which an options contract was traded. It plays a crucial role in analyzing market trends, determining entry and exit points, and assessing market sentiment. Unlike stocks, options LTP is influenced by various factors such as intrinsic value, time decay, and implied volatility. In this article, we will discuss how LTP in options is calculated and what factors affect it.

Understanding LTP in Options

LTP in options is simply the last price at which an option contract was executed between a buyer and a seller. It reflects the most recent transaction and not necessarily the best bid or ask price available in the market.

Formula for LTP Calculation

LTP is not explicitly calculated but observed from the most recent trade. However, it is influenced by:

1. Intrinsic Value: The difference between the current stock price and the strike price (for in-the-money options).

2. Time Value: The premium above intrinsic value, which accounts for time remaining until expiration.

3. Implied Volatility (IV): Higher IV leads to higher option premiums.

4. Demand & Supply: The liquidity of the contract impacts the LTP, especially for less traded options.

Steps to Determine LTP in Options

To determine the LTP of an option contract:

1. Check Exchange Data: The best way to get the latest LTP is from stock exchanges like NSE, BSE, or NYSE, which display live market data.

2. Use Trading Platforms: Brokers provide real-time data on LTP for each options contract.

3. Review Market Depth: Observing bid and ask prices can give an idea of how LTP might change in the next trade.

4. Consider Option Greeks: Delta, Gamma, Theta, Vega, and Rho influence option pricing and LTP fluctuations.

Example Calculation

Let's assume a call option on Stock XYZ has:

• Strike price: 1000

• Spot price: 1050

• Time to expiry: 10 days

• Implied volatility: 20%

• Recent trade: 55

If the last executed trade was at Rs. 55, then the LTP for this option contract is Rs. 55.

Conclusion

Calculate LTP in options trading is a crucial metric that provides insight into market activity and pricing. While it is observed rather than calculated, various factors like intrinsic value, time decay, and market demand influence it. Traders should always rely on real-time data from exchanges and brokerage platforms to track the LTP accurately.