Options Pricing Basics

Have you ever wondered how an options price is determined? In this video we tell you a bit about the history of options pricing, introduce you to several pricing models and, ultimately explain how the values in the market are calculated for each option.

In this video, we delve deeper into understanding how extrinsic value is calculated and the factors that are entered into options pricing formulas.

Implied Volatility uses Black-Scholes-Merton for calculating index derivatives and a binomial model for calculating equity derivatives.

After watching this video, you should be able to better understand the factors that determine the prices in the market and get an appreciation of what moves options prices. More importantly, you will learn about the important greeks, which is just a fancy name for understanding the sensitivities of an options price to changes in underlying parameters, e.g. underlying price, implied volatility, etc.

Video Contents

• How to price up options?
• Parameters used for pricing up options
• How Implied Volatility handles options pricing
• Introducing the most important options greeks
• Where to find options pricing in the trading platform