The 1977 Nobel Prize was awarded to Fischer Black and Myron Scholes – the two men behind the option pricing model.
Now, you may be wondering – why am I talking about these two award winners from 42 years ago?
Well, the equation these guys created is the reason that we, as option traders, are able to reduce risk and make money in multiple directions.
It’s elegant, to say the least. I’d even go as far as to call it beautiful!
Understanding how options are valued is a crucial part of harnessing their power. In order to trade like the pros, you need to know the breakdown of option pricing.
That’s exactly what I’m going to show you today. And trust me – it’s a whole lot simpler than any math equation you learned in high school.