NISM Series XVI - Commodity Derivatives Exam Notes
Page 13 Of 36
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Open Interest is the total number of option contracts outstanding for an underlying asset.
5 fundamental parameters on which the option price depends - Price of the underlying asset, Strike price of the option, Volatility of the underlying asset's price, Time to expiration, Interest rates
Volatility is the magnitude of movement in the underlying asset's price, either up or down.
Higher volatility = Higher premium,
Lower volatility = Lower premium (for both call and put options).
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