I’m back on the road in a big way for the next couple of weeks, which always puts the squeeze on my time to devote to blogging. However, looking back over my blog archives recently, I realized there’s a treasure-trove of good, classic options material that’s been buried under subsequent posts but still very relevant. I’d like to kick off the “Oldies But Goodies” as an occasional series to highlight the best of these evergreen posts.

This week, let’s kick this off with a question I hear all the time: “Where do options prices come from?” Clearly, like stock prices, options prices are a function of supply and demand – but in fact options pricing has several other factors driving it as well. This back-to-basics post lays out these factors in an easy-to-understand comparison with insurance products. Check out it!

Regards,
Brian (OG)

[image: Jukebox by jnb photos on flickr]

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options.

While implied volatility represents the consensus of the marketplace as to the future level of stock price volatility or probability of reaching a specific price point there is no guarantee that this forecast will be correct.

Any strategies discussed or securities mentioned, are strictly for illustrative and educational purposes only and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell securities.