Why Your Option Gains or Doesn't？Six Factors That Affect Option Pricing | #OptionsHandbook EP009
What you pay (or receive) when trading an option is termed the premium. 💰
This premium changes constantly. It moves with the market, just like stock prices do.
So what makes an option's premium go up or down?
📘 The Options Handbook breaks down 6 key factors that drive option premiums—simple and easy to understand.
▶ Stock Price 📈
A call's value increases as the stock rises above the strike, while a put's value increases as the stock falls below the strike.
▶ Strike Price 🎯
The option's value increases when the strike price is more favourable. For instance, a $100 call is worth more than a $110 call, assuming everything else is the same.
▶ Time to Expiration ⏳
More time means a greater chance for profit, so longer-term options usually cost more.
▶ Market Volatility 🌪️
When volatility is higher, the chances of making profitable moves increase, driving up option premiums.
▶ Interest Rates 📈
A moderate rise in interest rates tends to increase call prices and decrease put prices, though the effect is minor.
▶ Dividends 💸
Dividends reduce stock prices. Calls may decrease as holders do not receive dividends, whereas puts can appreciate, especially when dividends are high.
🎁 Curious for more? Get your hands on the Options Handbook—packed with easy explanations, real strategies, and must-know tips. Available now in the Tiger Coin Center! 🐯✨
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>> Click here for the Simplified Chinese version <<
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