Welcome
Risk profile: Foundational concepts
Options are financial contracts that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specific price before a given date.
The chart shows how an option's premium changes as the underlying stock price moves. The x-axis is the stock price, and the y-axis is the option's value.
Hover over the chart to see how the option value changes at different stock prices. The vertical dashed line follows your cursor.
- Strike price (K)
- The price at which the option can be exercised.
- Time to expiry (T)
- How long until the option expires, measured in years.
- Volatility (V)
- A measure of how much the stock price is expected to fluctuate.
- Premium
- The current market price of the option in the pricing model.
Click Next to explore call options interactively.