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.
