Introduction to Options, Pricing and Use Cases

Introduction to Options, Pricing and Use Cases

Peter Eisenhardt

30 years: Capital markets & investment banking

Peter provides an overview of the basic methodology behind pricing options.

Peter provides an overview of the basic methodology behind pricing options.

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Introduction to Options, Pricing and Use Cases

13 mins 18 secs

Overview

Options are financial instruments that give holders an option, but not an obligation, to buy or sell an underlying asset at an agreed price within the lifetime of the contract. The seller of an option is obliged to buy or sell if and when the buyer chooses to exercise it. Options are available on a wide range of assets, including stocks, bonds, commodities, currencies, futures, market indices, and funds.

Key learning objectives:

  • Define the basics of options pricing

  • Describe the basics of the Black-Scholes Model

  • Define options

  • Outline the advantages options offer in trading and hedging

  • Define delta trading

  • Define historic volatility and implied volatility

  • Understand how volatility is used to derive an option price

  • Learn the limitations of pricing models

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