InvestorQ : What are the factors that go into determining the option values?
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Mitali Bhutta made post

What are the factors that go into determining the option values?

Answer
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Dia Deshpande answered.
2 years ago


Option values are normally determined using the Black & Scholes method. There are various factors that influence the price of the call option and the Black & Scholes factors all these into the calculation. Of course, the strike price and the market price are very important factors. Political events that add to uncertainty and volatility in the market may also push up the time value of call options and therefore the price of these options. Similarly, if interest rates are cut then it increases the present value of the strike price and reduces the gap between the strike price and the market price. Thus it will be negative for call options. As we have seen, options trading in India offer a good way to participate in the markets with limited risk.