The Basics of Option Volatility

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When it comes to buying and selling options, most traders, whether beginners or experts, know a little about the Black-Scholes model of option pricing. This model, developed by Myron Scholes and Fisher Black in 1973 was invented to help traders determine what the market value of an option was based on expiration time, strike price, and historical volatility.   For some reason, though, many traders don’t use this, or any other tool for that matter, to determine the fair price of their options before they purchase them.

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