In This Chapter
- Basic concepts of options pricing
- The calculus of options price changes
- Understanding the role of volatility
- Using the Greeks for insights on valuation
Not only do options draw their value from an underlying security, they also have features that give them extra value. The relationship between the price of the option and the price of the underlying, the time to expiration, and the market rate of interest is complex.
How complex? We’re talking college-level-math complex. I’m not kidding. Many options strategists, market makers, and traders are PhD-level mathematicians, actuaries, and physicists who prefer ...