PCR-basedTrading

Option Pricing

Option prices are influenced by several factors, known collectively as the “Greeks.” These variables determine how an option’s value changes with respect to different market conditions.

Delta (Δ): Measures how much an option’s price changes for a ₹1 change in the underlying asset.

Gamma (Γ): Measures the rate of change of Delta.

Theta (Θ): Represents time decay — how much an option loses value as it nears expiry.

Vega (ν): Sensitivity to changes in volatility.

Rho (ρ): Sensitivity to changes in interest rates.

The Black-Scholes model is commonly used to estimate theoretical option prices by combining these factors.