Options Education

OIC320C: Options Pricing

Course Objective:

The objective of the course is to introduce the important aspects of options pricing. The course will review some of the factors that can drive the theoretical value of an option, and explain the key components of how theoretical option pricing can help anticipate price movements and how the theoretical components can help explain option price behavior.

Who Should Take This Course:

Intermediate and Advanced students

Course Description:

"Options Pricing" will introduce you to the key components of theoretical option pricing. This class has been designed to help the student achieve realistic expectations about how an option position is likely to behave under various conditions. Though their predictive value has limits, the key components of theoretical option pricing still offer an excellent tool for helping investors anticipate price movements and explain price relationships between options.

Course Chapters

Chapter 1 - Introduction

Introduces the most important elements influencing an options value, including: price of the underlying, strike price, time remaining until expiration, volatility, dividends, and prevailing interest rates. All of these factors are expandable via a convenient interactive table.

Chapter 2 - Options Pricing Models

In this chapter the actual mathematical equation for an option's theoretical value is explained and illustrated. This chapter gives a brief history of the Black & Scholes pricing model and the two professors, Fischer Black & Myron Scholes, who won a Nobel Prize in Economics for its creation.

Chapter 3 - Quantifiable Factors

This chapter gives an interactive tab for each of the six factors affecting an option's price. These tabs are expandable and offer the student tutorials, examples and a quiz at the end of each subject.

Chapter 4 - Option Greeks

For this chapter the student is exposed to some of the factors that can drive the theoretical value of an option. Option pricing models yield values that reflect an option's price sensitivity to changes in various quantifiable pricing factors – collectively referred to as the "Greeks." The factors presented are Delta, Gamma, Theta and Vega.

Course Resources:


OIC121P: Terminology & Mechanics

OIC122P: Covered Calls


OIC101W: The Options Basics Webcast