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#1
24th December 2004, 02:47 PM
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Pricing of Options
Hi!
I have never traded in options. I would like to ask a few questions about this: (1) Who decided the prices of options (2) I suppose options are contracts. Let us assume I buy a call option for the stock "ABC". This means I have the right to buy the said option at some particular price on or before the expiry date. Now this is some sort of a contract.I would like to know whether it is the stock exchange which gives mr this right or someone else? Can anybody comment. 
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#2
24th December 2004, 04:26 PM
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Re: Pricing of Options
Quote:
Intrinsic value and time value are two of the primary ingredients that go into an option's price. Intrinsic value is the extent to which the strike price of an option is in-the-money. Time value, occasionally known as extrinsic value, is defined as the amount by which an option's price exceeds its intrinsic value; time value declines over time — it is less and less relevant as expiration approaches. In fact, upon expiration, an option can be worth only its intrinsic value. The deeper an option is in-the-money, the more intrinsic value (and less time value) it has. This is when you can expect the option to move more like the underlying stock it's representing. Call Options Intrinsic value = Underlying Stock's Current Price - Call Strike Price Time Value = Call Premium - Intrinsic Value Put Options Intrinsic value = Put Strike Price - Underlying Stock's Current Price Time Value = Put Premium - Intrinsic Value
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#3
24th December 2004, 04:29 PM
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Re: Pricing of Options
Quote:
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#4
24th December 2004, 07:20 PM
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Re: Pricing of Options
Hi!
Want to know more about options check out *****! options education Chicago Board of Options Exchange or Indian sites HDFC intro to derivatives (pdf file) derivativesindia.com Moneycontrol.com Happy learning Regards!
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