You buy a call for ₹100. Later, its underlying has gone up, but the call is showing ₹91. You got the direction right. So why is the option losing money?
I'd check a few things before deciding the platform has made a mistake. Is it the same contract? Are the prices from the same time? And what happened to the time left before expiry and the volatility being priced into the option?
Those questions can explain why a call option falls when the market rises. We'll stay with this made-up ₹100 call as we work through them. There isn't enough information in the two prices alone to pin the loss on one cause.
Keep the same contract on the screen
Write down the underlying, call or put, strike and expiry before comparing two premiums. A call with a different expiry is a different contract, even if its strike is identical. Accidentally changing the selected expiry can create an apparent price mystery.
Check timestamps too. A current underlying quote and an option price from an earlier moment don’t describe one consistent market snapshot. The difference becomes especially misleading when a contract trades infrequently.
If these details are unfamiliar, the Neostox first options-contract exercise is a useful starting point. Identify what you’re observing before trying to explain why it changed.
What did the upward move help?
Holding other influences constant, an increase in the underlying tends to help a call's value. But 'holding other influences constant' is a modelling condition. In a real session, time, volatility expectations and market quotes can change together.
Delta describes an option's approximate sensitivity to a small move in the underlying, with other factors held constant. It isn’t a promise that the premium will move by that amount. It can also change as the market and contract conditions change.
Directional movement can be outweighed by changes in other pricing inputs. The relationship between the underlying and the chosen contract also matters. Neostox's option-strike guide explains why different strikes can respond differently to the same market move, rather than all calls behaving like identical copies of the underlying.
An option has a limited remaining life. As that remaining time shrinks, the opportunity for a favourable move also changes. Other things equal, the time-value component of a typical long call tends to erode as expiry approaches.
Theta is a model estimate of sensitivity to time passing. It isn’t a fee that gets taken out of your account every night. The option trades at market prices. Theta is an estimate, and it depends on the numbers used to calculate it.
Decay isn’t linear. Don’t multiply one displayed theta by several days and treat the result as a guaranteed future premium. Other conditions will rarely remain unchanged for that entire period. When using a charting workspace to compare the underlying and option, record matching timestamps so the observation is consistent.
The underlying might rise too slowly to make up for what the call loses elsewhere. Getting the direction right is only part of the trade. You also paid a particular price for a contract with limited time left.
Now look at what changed around the trade
Implied volatility, or IV, is a volatility input inferred from option prices through a pricing model. It reflects the movement being priced into the contract; it doesn’t tell you that the underlying will move in a particular direction.
Before a major event, option prices can reflect substantial uncertainty. After the event, that uncertainty can fall. A call may then lose some premium even if the underlying moved upward. This is often described as an IV drop or volatility crush.
Don’t label every disappointing result a volatility crush. Compare the same contract's IV at the relevant times and check the size of the change. A falling premium alone doesn’t identify the cause.
How ₹100 could become ₹91
Imagine a call premium begins at ₹100. During the observation period, a favourable underlying move contributes an estimated +₹6. Time passing contributes an estimated −₹3, and lower implied volatility contributes an estimated −₹12.
Add those made-up effects together: +₹6 − ₹3 − ₹12 = −₹9. The premium would move from ₹100 to ₹91 in this simplified explanation, even though the underlying effect was positive.
We’ve made up these three amounts to show how the effects can pull in different directions. They aren’t a valuation of a real option. In an actual trade, the effects change together. This simple sum won’t necessarily explain every rupee of the price change.
If the hypothetical position contained 50 units, the ₹9 premium decline would represent a ₹450 gross loss. That quantity is only an arithmetic example, not a current exchange lot size. Use the actual contract quantity when reviewing a real or virtual position.
LTP records the latest completed transaction. It doesn’t guarantee that you can buy or sell at that price now. An older transaction can make a premium comparison look surprising when the available bid and ask tell a different story.
For example, a call may show an LTP of ₹100 while the best available buyer offers ₹96. If you need to sell, ₹100 may be an unsuitable reference for the likely exit. A wider spread can also make a small underlying move less visible in your realised result.
Compare the same quote type at both observations where possible. Label whether each value is LTP, bid, ask, a midpoint or an actual fill. Don’t switch between them without noting it.
What would you write down next time?
For a useful comparison exercise, watch two calls with the same underlying and expiry but different strikes. Record both without placing a trade. Their premiums may react differently to the same underlying move. That observation is a reason to examine contract sensitivity, rather than assume one call must be incorrectly priced.
Record the contract identity, observation times, underlying prices, premiums, available quotes, IV and time remaining. Add the entry and exit fills if a trade occurred. Keep any missing value marked as missing rather than inventing an explanation.
Neostox's options-chain tools can help you study contract information during virtual practice. Its website currently states a 30-day market-price delay. Keep your underlying and option observations aligned within the same practice environment.
Go back to the call that fell from ₹100 to ₹91. You can now ask a better question than “Why didn't it go up?” Check the contract, the observation times, the underlying move, IV and the quote you could actually trade at.
You may still have gaps in the record. Leave them as gaps. A note saying “I didn't record IV, so I can't check its effect” is more useful for the next practice session than confidently blaming time decay without the evidence.