Options

Consider a pizza coupon

Consider auto coverage

Recognize that the right to sell is not the same as the obligation to sell!
Consider an auto insurance policy.* You pay a premium for coverage. If your car is in a collision, you have a “right” to payment from the insurer, making up for your loss.

*To be clear, options are not insurance, just as they are not pizza coupons, but the analogy is useful in understanding how a put value changes.

Comparing strikes and expirations

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Comparing values at expiration

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Volatility and option prices

Historical vs. implied “vol”

Historical vs. implied “vol” Implied volatility is calculated from option market prices as an output of a pricing model. It reflects the degree of future volatility expected by options traders