Pricing of Options

In this section

• Option Pricing Basics
  Explore the foundational concepts and models used to determine the fair value of option contracts, including real-world examples, diagrams, and practical tips for successful option pricing.
• Major Factors that Affect the Price of an Option
  Explores how underlying price, strike price, time to expiration, volatility, interest rates, and dividends influence option premiums, drawing on real-world examples and Canadian financial contexts.
• Intrinsic Value in Option Pricing
  How intrinsic value sets an option's immediate exercise value and its minimum rational price floor.
• Time Value in Option Pricing
  How time value lifts option premium above intrinsic value and then decays toward expiry.
• Delta: Option Price Sensitivity
  How delta measures option price sensitivity, approximate hedge ratios, and changes across moneyness.
• Advanced Greeks (Gamma, Theta, Vega, Rho)
  Explore the essential second-order and cross-dimensional risk metrics of options—Gamma, Theta, Vega, and Rho—and learn how they shape sophisticated hedging, speculative, and portfolio management strategies in the modern Canadian derivatives landscape.
• Implied vs. Realized Volatility (Vol Skew, Vol Smile)
  Compare implied and realized volatility, volatility risk premium, and the shape effects of skew and smile in options markets.
• Black–Scholes–Merton and Binomial Model Overviews
  Learn the foundational option pricing models—the Black–Scholes–Merton and Binomial framework—and discover how they shape modern derivatives valuation and risk management.