Part 2 Support and Resistance

Option Pricing and Factors Affecting It

The pricing of options is based on option pricing models, with the most popular being the Black-Scholes Model. Key factors affecting an option’s price include:

Underlying Asset Price: As the price of the asset rises, call option prices typically increase, while put option prices decrease.

Strike Price: Options closer to being “in-the-money” (profitable to exercise) generally have higher premiums.

Time to Expiration: Longer-dated options usually cost more due to higher time value.

Volatility: Higher volatility increases the likelihood of the option becoming profitable, raising the premium.

Interest Rates and Dividends: Changes in risk-free interest rates and expected dividends can also influence option pricing.