Options Pricing Drivers

Options Pricing Drivers

Lindsey Matthews

30 years: Risk management & derivatives trading

In the fourth video of his series ‘Derivatives Unlocked’ – Lindsey highlights how Option valuation depends on various inputs, including the price of the underlying, the volatility of the underlying, and others.

In the fourth video of his series ‘Derivatives Unlocked’ – Lindsey highlights how Option valuation depends on various inputs, including the price of the underlying, the volatility of the underlying, and others.

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Options Pricing Drivers

8 mins 14 secs

Overview

A course in equity valuation would look at fundamental drivers of corporate valuations. In this video we will show how Option valuation depends on various inputs, including the price of the underlying. A long call gives a long position in the underlying. This means that the value of a long call position would increase as the price of the underlying goes up. Value of an option is dependent on a number of factors, including the price and volatility of the option. Call options with lower strikes are worth more and for put options, those with higher strikes will be worth more. Value is more likely to be exercised if it is deep in the money - that is, the underlying price is high.

Key learning objectives:

  • Explain Options drivers.

  • Define Long Positions in Derivatives

  • Explain the price movements of options contracts

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Summary
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Expert
Lindsey Matthews

Lindsey Matthews

Lindsey runs Perfordiant, an investment risk and performance consulting firm. He has worked in financial markets since 1992. Lindsey became an MD in fixed income and equities, ran a Risk function, and was on the management team of an Asset Management fintech business. Lindsey is now a Visiting Fellow at the Henley Business School, and resides on the board of CFA UK.

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