Valuation of Options—How are options priced？
We usually say that the value of a stock ultimately depends on the profitability of the company. What then does the value of the option depend on?
In this session, we will talk about factors that affect the value of an option.Let's take a look at Tesla's option chain.
At the moment, Tesla's share price stands at USD 1,160. We can see that even when call options have the same expiration date, the premiums of the contracts vary greatly depending on the different strike prices. What is the reason behind this? If we scroll to the left, we can see this column: intrinsic value and time value. What are the characteristics of these two numbers? They add up to the latest option price.What is the white line in the middle? For a call, options above the line are in the money (ITM), while options below the line are out of the money (OTM).
How do we tell whether an option is in the money or out of the money? It depends on whether the strike price or the stock price is higher. If the strike price is higher than the stock price, the option is out of the money (OTM).
If the strike price is lower than the stock price, the option is in the money (ITM). If the strike price is equal to the stock price, the option is at the money (ATM).How about the put option? You can get it from the next video.
Related Articles & Videos
Component of options Contracts——how to read an option？
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Sharing for save keeping on my published page too for future reference
Learning about options