Options: Pricing, Usage and the Greeks

Abstract

Options hold an important part within the most undergraduate and graduate finance programs. Teaching options, their pricing and usage as well as the theory of implied volatility can be challenging. This study provides content to access real options data, calculate intrinsic value, premiums, implied volatility and Greeks. Recognizing the importance of visual learning, we also provide content to draw charts for profit and loss, premium and implied volatility. All calculations and charts are done across different option types (call and put), strike prices, different maturities and across different underlying securities for comparative teaching. Study methods can easily be employed using Stata by instructors and by students. Specific study results can also be replicated.

Keywords: Financial Options, Implied Volatility, Greeks

JEL Classification: G10, G19