<#-- Rebranding: Header Logo--> <#-- Rebranding: Footer Logo-->
  1. Options Pricing: Introduction
  2. Options Pricing: A Review of Basic Terms
  3. Options Pricing: The Basics of Pricing
  4. Options Pricing: Intrinsic Value and Time Value
  5. Options Pricing: Factors That Influence Option Price
  6. Options Pricing: Distinguishing Between Option Premiums and Theoretical Value
  7. Options Pricing: Modeling
  8. Options Pricing: Black-Scholes Model
  9. Options Pricing: Cox-Rubinstein Binomial Option Pricing Model
  10. Options Pricing: Put/Call Parity
  11. Options Pricing: Profit and Loss Diagrams
  12. Options Pricing: The Greeks
  13. Options Pricing: Conclusion

Option pricing refers to the amount per share at which an option is traded. Options are derivative contracts that give the holder (the "buyer") the right, but not the obligation, to buy or sell the underlying instrument at an agreed-upon price on or before a specified future date. Although the holder of the option is not obligated to exercise the option, the option writer (the "seller") has an obligation to buy or sell the underlying instrument if the option is exercised.

Depending on the strategy, options trading can provide a variety of benefits, including the security of limited risk and the advantage of leverage. Another benefit is that options can protect or enhance your portfolio in rising, falling and neutral markets. Regardless of why you trade options – or the strategy you use – it's important to understand how options are priced. In this tutorial, we'll take a look at various factors that influence options pricing, as well as several popular options-pricing models that are used to determine the theoretical value of options.

[ Options are a great way to add flexibility to your portfolio, but it can be challenging to interpret expiration dates and calculate breakeven points. If you're interested in options trading, you may want to check out Investopedia's Options for Beginners Course. You will learn how options are priced, risk management techniques, and advanced concepts, like spreads and straddles, in over five hours of on-demand video, exercises, and interactive content. ]


Options Pricing: A Review of Basic Terms
Related Articles
  1. Trading

    Should an Investor Hold or Exercise an Option?

    There are times when a trader or investor shouldn't exercise an option. Find out when to hold and why you shouldn't exercise an option.
  2. Investing

    Why Options Trading Is Not for the Faint of Heart

    Trading options is not easy and should only be done under the guidance of a professional.
  3. Trading

    Dividends, Interest Rates and Their Effect on Stock Options

    Learn how analyzing dividends and interest rates is crucial to knowing when to exercise early.
  4. Trading

    The Basics Of Option Price

    Learn how options are priced, what causes changes in the price, and pitfalls to avoid when trading options.
  5. Trading

    How to Make Money by Trading Index Options

    Index options are less volatile and more liquid than regular options. Understand how to trade index options with this simple introduction.
  6. Trading

    Call options: Right to buy versus obligation

    Learn what a call option is, how buyers and sellers are determined, and what the difference between a right and an obligation is for options investors.
  7. Investing

    Take Advantage of Employee Stock Options

    If your employer offers stock options, they can contribute to your long-term financial success. Here's how.
  8. Investing

    What are Options Contracts?

    An explanation of options contracts, call options and put options.
Trading Center