Part 6 Learn Institutional Trading

How Options are Priced

Options are more complex than stocks because they have two value components:

Intrinsic Value = Difference between spot price and strike price (if profitable).

Time Value = Extra premium traders pay for the possibility of future moves.

The pricing is influenced by The Greeks:

Delta: Sensitivity of option price to underlying asset moves.

Theta: Time decay (options lose value as expiry nears).

Vega: Impact of volatility on option price.

Gamma: Rate of change of delta.

Understanding Greeks is essential for advanced option strategies.

Types of Options

Options exist across asset classes:

Equity Options: Stocks like Reliance, TCS, Infosys.

Index Options: Nifty, Bank Nifty, Sensex.

Currency Options: USD/INR, EUR/INR.

Commodity Options: Gold, Crude oil, Agricultural products.