Basics     Futures     Options     Option Trading Strategies     Tax Aspects
  • About Options
  • An analogy of an Option
  • Call and Put Options
  • Call Option
    Illustration of a Call Option on an index
    Illustration of a Put Option on stocks
    Payments/Margins involved in buying and selling Call Options
    Settling a Call Option
    Put Option
    Illustration of a Put Option on an index
    Illustration of a Put Option on stocks
  • Covered Options and Naked Options
  • Reducing the price of existing shares
    Simply speculating
    Naked calls or puts
    Options Pricing
    Other factors that affect the Option premium
  • Difference between Futures and Options
  • *Disclaimer


    Options Pricing
    So far, you have come to understand that the price that you pay to purchase an Option is called the premium. You also know that it is a small fixed amount and that it is market driven. Now let's look a little deeper at how this premium is arrived at in the market and the science beneath it. However, before that, you must familiarize yourself with certain terms, which will facilitate a better understanding of pricing of Options.

      In-the-money, out-of-the-money and at-the-money
      Intrinsic Value and Time Value
      Combined effect of the Intrinsic Value and Time Value