RSM332 Option Prices Determinants
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5 Terms
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Future Stock Price (S)
S ↑ = Call ↑, Put ↓
2
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Strike Price (X)
X ↑ = Call ↓ , Put ↑
3
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Volatility (σ)
σ ↑ = Call ↑ Put ↑ (more chance to finish in-the-money)
4
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Interest Rate (r)
r ↑ = Call ↑ (buy later is cheaper); Put ↓ (sell later is worse)
5
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Time to Expiration (T)
T ↑ = Call ↑ Put ↑ (more time value); as time passes, Theta decay reduces option value
Note 
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