What is the formula for calculating the option fee?
Option fee = connotation value+time value.
The option fee is determined by the brokers entrusted by both parties in the exchange through public bidding, and its size mainly depends on:
1 Term of option contract. The longer the validity period, the greater the buyer's choice, the higher the possibility of market price changing in the buyer's expected direction and the higher the option fee; On the contrary, the shorter the validity period, the smaller the buyer's choice, the lower the possibility that the market price changes in the buyer's expected direction, and the lower the option premium.
2 the level of the agreed price. There are two situations when buying a call option and a put option. The option fee for buying call options decreases with the increase of the agreed price; The option fee for buying put options increases with the increase of the agreed price.
3. The trend of price changes in the futures market. When the futures price tends to rise, the option fee for buying call options increases; When futures prices tend to fall, the option fee for buying call options decreases.
4. The degree of price fluctuation of options trading commodities. The greater the market price fluctuation of a commodity, the greater the significance of making options and the higher the option fee; Conversely, the lower the option fee.
Royalties shall be borne by the buyer. It is the highest loss that the buyer has to bear when the most unfavorable change occurs. Therefore, royalties are also called insurance premiums. Because it is the price of buying or saving rights, it is also called the price of rights or options.
Generally speaking, the average premium of signed option contracts is about 10% of the price of financial assets or commodities traded in the contracts. This fee is usually paid two business days after the transaction, which represents the biggest loss of the buyer and therefore the biggest profit of the seller.