Option Value Calculator

Are you planning to purchase an extra garage space with your apartment even though you are not certain of using it? Or are you thinking of pursuing a higher degree in statistics with a bachelor’s in chemical engineering just to broaden your career choices? Then you’re already buying options.

​

As a financial product, options or derivatives offer the advantages of leverage, low capital requirement, diversification and high risk-reward ratio to the investors. However, they come with trade-offs such as lower liquidity, higher risk, complexity of the trade and higher spreads. Therefore, it is critical for the investor to weigh the pay-offs before allocating resources to option trading.

​

The subject of option value is technical with nuanced terms and is likely to be perceived as complicated by first-time traders/investors.

​

So let’s attempt to decode the nuances related to option value.