Part 8 Trading Master Class With Experts

How Option Pricing Works

Option pricing is complex because it depends on many variables. The most commonly used model is the Black-Scholes Model, which calculates the theoretical value of options based on several factors:

Underlying asset price

Strike price

Time to expiration

Volatility

Interest rates

Dividends (if any)

Volatility

This is the most important factor in option pricing.

High volatility means the underlying asset price can move significantly, increasing the chance that the option becomes profitable.