What Moves Options Prices? The 6 Factors Every Trader Must Know

# What Moves Options Prices? The 6 Factors Every Trader Must Know Did you know that approximately **93%** of retail traders lose money trading options? The remaining **7%** possess a unique understanding of what moves options prices. What if you could tap into that knowledge? Understanding these dynamics can make the difference between consistent profits and losing trades. Ready to close the gap on your options trading education? In this article, we will uncover the six essential factors that influence options prices that every trader must know. By the end, you might just belong to that coveted 7%. ## What Are Options Prices and Why Do They Matter? Before diving into what moves options prices, let's take a moment to clarify what options prices actually represent. The price of an option, known as the **premium**, is determined by various elements that reflect both the intrinsic and extrinsic value of the underlying asset. **Did you know?** Options prices can fluctuate wildly, sometimes leading to a **200% return** in a matter of days or causing a complete loss. That volatility creates opportunities — but only if you’re equipped with the right knowledge. ### **1. The Underlying Asset’s Price** The most apparent factor affecting option prices is the price of the underlying asset. This relationship is direct: as the asset price moves, the option's premium adjusts accordingly. For instance, if you’re looking at a call option for **Apple (AAPL)** with a strike price of **$150**, and AAPL’s stock climbs from **$155** to **$160**, that call option becomes more valuable. The market will price this option higher because the likelihood of it being in-the-money at expiration increases. - **Action Step 1:** Track historical performance of the underlying asset. If AAPL typically rallies during earnings season, align your options strategy accordingly. ### **2. Implied Volatility (IV)** Implied volatility measures the market's expectations of future volatility in the underlying ass