The lower bound for any non-dividend paying call option is: This means that the lower bound is equal to the current stock price minus the options strike price multiplied by the natural e, to the power of negative risk-free interest rate multiplied by the options time to expiry. Example: Say that the current stock price [...]

For a call option, regardless of the fact that it is an American or a European call option, the option will give the holder the right to purchase 1 share of a stock for a certain price. However, regardless of how high the stock price rises for an option; its price can never exceed that [...]

Below is a list of all assumptions relative to Option pricing and calculation. Please keep these in mind whenever you are considering trading and/or dealing with options. Full assumptions about the calculation of option prices Some of the assumptions which must be made include: There are market participants such as large investment banks There are [...]

I recommend that you really only read this article if you are keen to learn the mathematics behind options. It’s quite complex and is really meant for higher level financial enthusiasts. I am always open to questions. Properties Of Stock Options There are a number of different factors which affect the price of a stock [...]