Valuation of options is based on the price of the underlying, not the strike. Value of an option can be deduced from the value of its out-of-the-money option. The key relationship between options is something we used to use all day every day on the trading floor. It is a key relationship which junior traders were taught all day, every day. It can be used by investors to help them in valuation, risk management and pricing. It will require some kind of option pricing model, but there are some key parts that do not require it.
Key learning objectives:
Explain Valuation of Options
Explain the concept of Long Protection
Explain Call Options
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