Explaining Options Markets – Part 2

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Explaining Options Markets – Part 2

The pricing of options for equities uses the Black-Scholes method. The mathematical formula was developed in the late 1960s. Unless you were a math major, the formula is complex and wont be repeated here. The formula uses the stock price, the exercise price, the interest rate, the standard deviation of the change in the stock price, and the time to maturity to determine the option price.

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