Help - Vanilla Options profit

[LuigiLuigi]

Good afternoon, quick newbie question...

I'd like to buy 1 contract Vanilla Option US 500 4400 CALL, when I select the amount of contracts to buy there's a note saying "1 USD per point",

does it mean that if the US500 index will raise to 4500 I'll have 100USD profit?

if not, how is profit calculated?

Thanks in advance for you help, Luigi

 

[AndaIG]

Hi @LuigiLuigi

Thanks for the query

Profit/loss= No of contracts x Value per contract x (Option closing price - Option opening price)

So in your example profit would be 100USD less the premium paid when purchasing. 

All the best 

Anda

[LuigiLuigi]

Thank you very much for your fast reply

One more question, how is the price of the option calculated?

for instance, at the moment the price of a Vanilla Option US 500 4400 CALL is about 279USD per contract

and the US 500 Future is about 4383

How do you get the 279USD price?

Thanks, Luigi

[AndaIG]

Hi @LuigiLuigi

Thanks for the query

We price our options based on the Black-Scholes model. This is a mathematical model that will calculate option prices looking at the following variables: Value of the underlying asset, strike price, volatility and time until expiration. The model will automatically derive a price which is then displayed on the platform. This is a brief summary but you are welcome to research the model to delve into the detail. 

All the best

Anda

 

[LuigiLuigi]

Thanks Anda for your super fast reply

[Kodiak]

https://www.optionsplaybook.com/options-introduction/option-greeks/