Charting Combined Option Premium: How Pro Traders Time Option Trades Using a Simple Metric

While most traders obsess over direction, professional options traders often track something much quieter — the combined premium of ATM Call and Put options.

Why? Because this one value tells them more about volatility, sentiment, and upcoming market moves than price alone.

Let’s break it down — with real Nifty 25,000 examples.

What Is Combined Option Premium?

It’s the sum of the premiums of the ATM (At-the-Money) Call and Put options.

Combined Premium=ATM Call Premium + ATM Put Premium

If Nifty is at 25,000, the ATM strike is 25,000.

Let’s say:

🠖 25,000 CE is trading at ₹110

🠖 25,000 PE is trading at ₹130

Combined Premium = ₹240

This combined premium reflects:

🠖 Market’s expectation of movement

🠖 Current implied volatility

🠖 Time value left before expiry

How to Plot It?

1. Track ATM CE + PE every 5, 15, or 30 minutes

2. Plot it as a line or area chart

3. Overlay with Nifty spot price

Platforms like Navia ALL in One Zero Brokerage APP let you track this visually.

How Pro Traders Use Combined Premium?

1. High Premium = High Volatility or Event Risk

If combined premium is unusually high, it signals:

🠖 Upcoming event (RBI, Fed, Budget)

🠖 Uncertainty or sharp move expected

Pro move: Avoid selling options into high premiums unless you expect a volatility crush.

2. Dropping Premium = Smart Money Exiting

If combined premium steadily drops while price is sideways:

🠖 Traders are exiting

🠖 Volatility expectations are declining

This often leads to:

🠖 A sudden breakout once everyone relaxes

🠖 Or a dull range-bound expiry

3. Sudden Premium Spike Without Price Move = Big Money Positioning

Let’s use a real chart-style example:

Time	Nifty Spot	25,000 CE	25,000 PE	Combined Premium
10:00 AM	25,000	₹110	₹130	₹240
11:30 AM	24,990	₹90	₹120	₹210
12:00 PM	24,985	₹100	₹150	₹250 spike!

Interpretation:

Nifty barely moved, but premium spiked.

Likely cause? Option buyers entering — a breakout or reversal could be coming.

Smart traders watch for this as a timing signal.

Shown below is the Actual combined premium chart of Nifty on 20 June 2025 plotted for the last 5 trading days.

You can analyze the Combined Premium Chart through Navia all-in-one app.

4. Expiry Day Trick

On expiry:

🠖 Premiums collapse due to time decay

🠖 A reversal in combined premium mid-day can signal a sharp directional move

If the premium rises even briefly, it means traders are bracing for one last spike — and you may catch it early.

How to Use It Effectively?

Pattern	What It Means
Premium Falling + Flat Price	IV is dropping, breakout may come soon
Premium Rising + Flat Price	Anticipation of a move (often reversal)
Premium High + Event Ahead	Risk priced in — wait for post-event move

Final Thoughts

Combined Premium is:

🠖 Easy to calculate

🠖 Great for identifying sentiment shifts

🠖 Powerful for intraday & expiry trading

But remember — it’s a signal, not a strategy on its own.

Always use it with price action, volume, and OI data.

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DISCLAIMER: Investments in the securities market are subject to market risks, read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Brokerage will not exceed the SEBI prescribed limit.