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Course Lessons

Option Prices & Pricing

1 Prices & Pricing Sample Lesson
2 How to Register for a Framework Course
3 Framework Investing Course Orientation
4 Pricing Screen Set-Up and Last Price
  • Take-Aways: Pricing Screen Set-Up and Last Price
  • Comprehension Check: Pricing Screen Set-Up and Last Price
5 Bid and Ask Prices
  • Take-Aways: Bid and Ask Prices
  • Comprehension Check: Bid and Ask Prices
6 Note on Bid-Ask Prices
7 Visualizing Option Prices
  • Take-Aways: Visualizing Option Prices
  • Comprehension Check: Visualizing Option Prices
8 Interlude 1: Prices & Pricing
9 Intuition behind Option Pricing
  • Take-Aways: Intuition behind Option Prices
  • Comprehension Check: Intuition behind Option Pricing
10 The Black-Scholes Option Pricing Model
  • Take-Aways: The Black-Scholes Option Pricing Model
  • Comprehension Check: The Black-Scholes Option Pricing Model
11 Drift and Dividends
  • Take-Aways: Drift and Dividends
  • Comprehension Check: Drift and Dividends
12 BSM Cone Probabilities
  • Take-Aways: BSM Cone Probabilities
  • Comprehension Check: BSM Cone Probabilities
13 Delta - the Handiest "Greek"
  • Take-Aways: Delta - the Handiest "Greek"
  • Comprehension Check: Delta – the Handiest "Greek"
14 Volatility and the Rules of Pricing
  • Take-Aways: Volatility and the Rules of Pricing
  • Comprehension Check: Volatility and the Rules of Pricing
15 Implied Volatility
  • Case Study: Implied Volatility
  • Take-Aways: Implied Volatility
  • Comprehension Check: Implied Volatility
16 Interlude 2: Prices & Pricing
17 Finding the 'Right' Volatility
  • Take-Aways: Finding the 'Right' Volatility
  • Comprehension Check: Finding the 'Right' Volatility
18 Note on Finding the Right Vol
19 Option Pricing Dynamics
  • Take-Aways: Option Pricing Dynamics
  • Comprehension Check: Option Pricing Dynamics
20 Time Decay
  • Take-Aways: Time Decay
  • Comprehension Check: Time Decay
« ‹ › » page 1 / 2
Return to Option Prices & Pricing

Option Prices & Pricing

Prices & Pricing Sample Lesson
By Lesson's End:
  • You will see how to translate the information on a pricing screen into a range of exposure diagram.
  • You will see how to think about and represent the Effective Buy Price of a purchased call option on Target (TGT).
  • You will review how to make an option order verbally to a broker.
  • You will review how the order affects volume and open interest -- two measures of transaction volume mentioned in the Option Market Mechanics mini-course.
Vocabulary List:
N/A

People treat option pricing as though it was rocket science! The fact is that the theoretical underpinnings of option pricing is almost laughably simple. In this course, we take both a theoretical and practical approach — explaining what the complex option pricing equations are saying in visual terms and showing how pricing information is displayed on a brokerage screen.

The course…

  • shows you how to read option pricing screens and how to associate range of exposure diagrams to them,
  • describes the bid-ask spread and shows how important it is when transacting in the option market,
  • offers an intuitive explanation of option pricing, including a graphical illustration of “the Greeks”,
  • explains the concept of implied volatility — one cornerstone to option pricing,
  • shows the strengths and weaknesses of option pricing models, and
  • illustrates why the uninitiated get the impression that option prices behave so counterintuitively.

The snippet from the video you see above is from the lesson “Visualizing Option Pricing” and shows how to translate what you see on an actual, live pricing screen to the range of exposure diagrams presented in the Options Basics mini-course.

Our overall goal for this course is to give you an understanding of option pricing that is more intuitive and thorough than that of many professional traders and risk managers.

Supplemental Resources

  • Video Transcript and Vocabulary Definitions
  • Lesson Instructions and Notes on Quizzes