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Variables that Impact the Pricing of Options

What are the variables that impact the pricing of options?

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The price of an option does not always change in conjunction with the price of its underlying stock and therefore, it is important to understand what variables contribute to the movement of option price and their affect. First, the option strike price, which is the price at which a specific derivative contract can be exercised, will determine whether an option is in-the-money, at-the-money or out-of-the-money. Next, the current stock price variable will have the opposite effect on call and put. ...

Solution Summary

This solution contains an explanation of why it is important to understand what variables contribute to the movement of option price and their affect and the impatct variables have on the pricing of options. The solution contains approximately 335 words of text.

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