Futures Lookup   Quote Chart Opinion Profile Markets Futures Forex Funds Signals Sectors My Quotes Education Member Sign-In: › Subscriber Login › Member Benefits Markets Overview: › Market Indices › Exchange Funds › Market Momentum › 52 Week Highs › 52 Week Lows › Volume Leaders › Percent Advances › Percent Declines › Price Advances › Price Declines › Price Volume › Volume Advances › Highs / Lows › What's Hot › What's Not  Stock Options  Market Snapshot  Rankings  Commentary  Education  Glossary › IB Times News › Funds › Signals › Sectors Options Education Featured Sponsor:  What Affects Equity Options Prices? Option pricing is impacted by a variety of factors. Seven main components that affect the premium of an option include: The current price of the underlying financial instrument The strike price of the option in comparison to the current market price (intrinsic value) The type of option (put or call) The amount of time remaining until expiration (time value) The current risk-free interest rate The volatility of the underlying financial instrument The dividend rate, if any, of the underlying financial instrument Each of these factors plays a unique part in the price of an option. In most cases, the first 4 are pretty easy to determine. The others may be forgotten or misunderstood; however, each is important. Calculating intrinsic value and time value is critical to assessing option premium. Also, when it comes to trading with options, reviewing volatility levels can make the difference between successful and unsuccessful trades. In addition, it is noteworthy to assess the current risk-free interest rate and whether or not a particular stock is prone to the release of dividends. Higher interest rates can increase option premiums, while lower interest rates can lead to a decrease in option premiums. Dividends act in a similar way, increasing and decreasing an option premium as they increase or decrease the price of the underlying asset. When a stock pays a dividend, the short seller is responsible for that payment. In contrast, the put buyer benefits from the decrease in stock price due to dividend payment. Back to Top    Barchart Marketplace  »» Barchart.com © Copyright 2008, Barchart.com User agreement applies. Data provided by ddfplus and subject to terms of use and privacy policy. |  Webmaster Tools  |  Advertising  |  Suggestions Box  |  About Barchart.com  |  Support  | Press Ctrl+P to print this page   Data and information is provided for informational purposes only, and is not intended for trading purposes. Neither Barchart.com Inc. nor its data provider (ddfplus) shall be liable for any errors or delays in the content, or for any actions taken in reliance thereon. By accessing the Barchart.com Inc. web site, a user agrees not to redistribute the information found therein. Press Ctrl+D to bookmark this page - Set www2.barchart.com as your Home Page All Equities and Futures data is delayed according to exchange rules. NYSE and AMEX at least 20 minutes. Nasdaq at least 15 minutes. CME and CBOT at least 10 minutes. NYBOT, NYMEX and COMEX at least 30 minutes.