Option Pricing Explained: What Makes Up a Premium, with an Excel Calculator

Option pricing basics: how options are priced, what makes up a premium, intrinsic and extrinsic value, and how to check the numbers with an option premium calculator that pulls live data into Excel.

Start here: option pricing in Excel.

1. 1
   How Are Options Priced?

   An option premium equals intrinsic value plus extrinsic (time) value. Models like Black-Scholes price the extrinsic part from volatility, time, and rates.

2. 2
   The Fundamentals of Option Pricing

   An option price is intrinsic value plus time value, driven by stock price, strike, time, volatility, rates and dividends. Black-Scholes, binomial models and Greeks.

3. 3
   The Factors Impacting Option Prices

   Option prices depend on the stock price, strike, time to expiration, implied volatility, interest rates, and dividends. How each one moves call and put premiums.

4. 4
   What Makes Up an Option Premium

   Option premium is the price paid for an options contract, determined by intrinsic value, time value, volatility, and other factors. Learn how to calculate, analyze, and track option premiums using Excel and MarketXLS for

5. 5
   What Is Intrinsic Value in Options Trading?

   Intrinsic value is how far an option is in the money: stock price minus strike for calls, strike minus stock price for puts, and never below zero.

6. 6
   Extrinsic Value in Options: What It Is, How to Calculate It, and Why It Matters

   Extrinsic value is the portion of an option's price above its intrinsic value: driven by time and volatility. Learn how to calculate, track, and profit from extrinsic value in Excel.

7. 7
   Get Started in Option Trading with an Option Premium Calculator

   An option premium calculator estimates what an option should cost from stock price, strike, time, volatility, and rates, and splits it into intrinsic and time value.