Editing Call option (section)

==Price of options==
Option values vary with the value of the underlying instrument over time. The price of the call contract must act as a proxy response for the valuation of:
* the [[expected value|expected intrinsic value]] of the option, defined as the expected value of the difference between the strike price and the market value, i.e., max[S−X, 0].<ref name=":0">{{Cite book |last=Hull |first=John |title=Options, Futures, and Other Derivatives 10th Edition |publisher=Pearson |year=2017 |isbn=978-0134472089 |pages=231–246}}</ref>
* the [[risk premium]] to compensate for the unpredictability of the value
* the [[time value of money]] reflecting the delay to the payout time
The call contract price generally will be higher when the contract has more time to expire (except in cases when a significant [[dividend]] is present) and when the underlying financial instrument shows more [[Volatility (finance)|volatility]] or other unpredictability. Determining this value is one of the central functions of [[financial mathematics]]. The most common method used is the [[Black–Scholes model]], which provides an estimate of the price of European-style options.<ref>{{cite book |title=Finance for Executives: A Practical Guide for Managers |first=Nuno |last=Fernandes |year=2014 |page=313 |publisher=NPV Publishing |isbn=978-9899885400}}</ref>