PCR Trading Strategies

Option Premium

The option premium is the cost of buying an option contract. It is influenced by several factors:

Underlying Price – higher underlying prices increase call premiums and decrease put premiums.

Strike Price – closer the strike price is to current market price, costlier the option.

Time to Expiry – more time means higher premium.

Volatility – higher volatility increases premium as uncertainty rises.

Interest Rates and Dividends – have minor impacts but still contribute.

These factors are modeled using the Black-Scholes model and other pricing techniques.