Part 2 Intraday Tradiing Master Class

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.