12. Understanding Price Changes
Option prices are in constant movement. So are the values of structured securities that contain options. This chapter looks at the components of option value and the factors that drive changes in those values. The chapter begins with a hypothetical investment, explains the role of implied volatility in constructing an investment profile, and then tracks option prices in terms of intrinsic value, time value, and the elements of extrinsic value. The Greeks are covered in more detail in the next chapter.
Investing in XYZ
Imagine you are watching CNBC’s Mad Money. Jim Cramer just interviewed the CEO of Company XYZ. You already know the company and like what you heard in the interview. You think now is a good time ...
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