Part 7 Trading Master Class With Experts

Option Pricing: Why Premium Changes

Premium is the price paid by the option buyer. It depends on:

1. Intrinsic Value

Value if exercised today.

2. Time Value

More time → more chances of profit → higher premium.

3. Volatility (IV – Implied Volatility)

When volatility increases, option premiums rise.

4. Supply & Demand

High demand increases option prices.

5. Interest Rates & Dividends

These have minor impact but still matter for pricing models.