Option pricing refers to the amount of the option premium per share at which an option contract is traded in the live market.
Premium is the price paid or received when buying/selling options. This price can be split into two components.
Intrinsic value = Equity for In the Money Options
Extrinsic value = Time, Volatility, Risk-Free Interest Rates
The option price is calculated using the option pricing model known as the Black Scholes Option Pricing Model.
