How Option Pricing Works
Option prices (premiums) are influenced by several factors. The most important are:
Underlying Price: The current price of the stock/index.
Strike Price: The difference between the current price and strike determines moneyness.
Time to Expiry: The more time left, the higher the premium (time value).
Volatility: Higher volatility increases the premium since there’s a greater chance of price movement.
Interest Rates & Dividends: These also affect option pricing slightly.
A famous model called the Black-Scholes Model is commonly used to calculate theoretical option prices based on these factors.
Option prices (premiums) are influenced by several factors. The most important are:
Underlying Price: The current price of the stock/index.
Strike Price: The difference between the current price and strike determines moneyness.
Time to Expiry: The more time left, the higher the premium (time value).
Volatility: Higher volatility increases the premium since there’s a greater chance of price movement.
Interest Rates & Dividends: These also affect option pricing slightly.
A famous model called the Black-Scholes Model is commonly used to calculate theoretical option prices based on these factors.
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Email: skytradingmod@gmail.com
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Disclaimer
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Hello Everyone! 👋
Feel free to ask any questions. I'm here to help!
Details:
Contact : +91 7678446896
Email: skytradingmod@gmail.com
WhatsApp: wa.me/7678446896
Feel free to ask any questions. I'm here to help!
Details:
Contact : +91 7678446896
Email: skytradingmod@gmail.com
WhatsApp: wa.me/7678446896
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.