Options: how they pay and what moves them

Work out what an option pays at the end, what changes its price along the way, and where the maths behind it breaks down.

Module 11 of 26, in the stage "How markets work". 6 lessons.

Lessons

1. Option payoffsWork out what calls and puts pay, and tell payoff apart from profit. 18 min.
2. What moves an option priceRead delta, gamma, theta and vega as “how much does it change right now” numbers. 18 min.
3. When option maths breaks downSpot the assumptions that make an option pricing model fragile. 18 min.
4. Implied volatility as an expected move, and the VIXTurn an implied volatility number into a rough daily and monthly move, and read the VIX. 16 min.
5. Time decay and IV crushSee theta as daily rent that speeds up near expiry, and why an option can lose value even when the stock moves your way. 16 min.
6. Put-call parity: why calls and puts are tied togetherUse put-call parity to see why call and put prices cannot drift apart freely. 16 min.

Concepts covered

• Volatility

Keep going

• Previous module: Crypto safety
• Next module: Options for beginners, in practice
• All 26 modules and 157 lessons
• Open the first lesson in the course

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