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Topic_15_E2 - Topic 15 Exercise 2 Options Valuation Factors...

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Topic 15 Exercise 2 Options Valuation Factors Affecting Option Prices The profits and losses you experience from options trading are affected by many factors and not just the movement in price of the underlying stock. Even if the price of the underlying stock does not change—a very unlikely occurrence—the price of the option will change over time and in response to other market factors. It is critical to understand the factors that drive option pricing and how option prices change with time and other market estimates. The Chicago Board of Trade Options Exchange, CBOE, has an educational program that is available on its website, called the “options tool box.” This program has an extensive library of educational topics on option prices and the factors that are important in determining options prices. The program can be downloaded or run on the website (may require additional, free software download if you are so prompted). After accessing the program, answer the following questions: 1. From the main menu, select the principal factors affecting options price and then choose the models tab.
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