Options Trading

  1. Option Pricing and Value
    1. Components of an Option's Price
      1. Intrinsic Value
        1. Calculation for Calls
          1. Calculation for Puts
            1. Intrinsic Value at Expiration
            2. Extrinsic Value (Time Value)
              1. Time Premium
                1. Volatility Premium
                  1. Time Value Decay
                2. Factors Influencing Option Prices
                  1. Price of the Underlying Asset
                    1. Direct Price Relationship
                      1. Price Movement Impact
                      2. Strike Price Relative to Underlying
                        1. Moneyness Effect
                        2. Time to Expiration
                          1. Time Decay Acceleration
                            1. Weekend and Holiday Effects
                            2. Volatility of the Underlying Asset
                              1. Historical vs. Implied Volatility
                                1. Volatility Risk Premium
                                2. Interest Rates
                                  1. Risk-Free Rate Impact
                                    1. Interest Rate Changes
                                    2. Dividends
                                      1. Ex-Dividend Date Effects
                                        1. Dividend Yield Impact
                                          1. Early Exercise Considerations
                                        2. Volatility
                                          1. Historical Volatility (HV)
                                            1. Calculation Methods
                                              1. Annualized Volatility
                                                1. Limitations of Historical Data
                                                2. Implied Volatility (IV)
                                                  1. Market Expectations
                                                    1. IV Rank
                                                      1. IV Percentile
                                                        1. IV Crush
                                                        2. The Volatility Smile and Skew
                                                          1. Volatility Smile Pattern
                                                            1. Volatility Skew
                                                              1. Causes of Skew
                                                                1. Impact on Option Pricing
                                                                  1. Term Structure of Volatility
                                                                2. Option Pricing Models
                                                                  1. The Black-Scholes Model
                                                                    1. Model Assumptions
                                                                      1. Model Limitations
                                                                        1. Inputs and Outputs
                                                                          1. Black-Scholes Formula
                                                                          2. Binomial Option Pricing Model
                                                                            1. Tree Construction
                                                                              1. Risk-Neutral Valuation
                                                                                1. American vs. European Option Valuation
                                                                                2. Other Models
                                                                                  1. Monte Carlo Simulation
                                                                                    1. Trinomial Models
                                                                                      1. Finite Difference Methods

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                                                                                  2. Core Concepts and Terminology

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                                                                                  4. The Greeks: Measuring Option Risk and Sensitivity