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price option and a Black-Scholes equation

The prices of derivatives, including options, can be determined using some mathematical models that allow you to obtain a theoretical price of the instrument.
These formulas are quite complex and start from some assumptions that often do not occur in the real market.
Certainly one of the most popular is the 'Black-Scholes equation . Looking at these
formulas can not amaze those who assert that make trading in the options is "complicated."
also looking on the net is not a "simplification" practice of such theories (theories of why we are talking about), and formulas. A little 'as someone you are looking for the formula to calculate the area of \u200b\u200ba rectangle, are the only explanation Geomet (higher education) that says that the rectangle is the integral over bla bla bla, we all know that when multiplying "Base x Height" we get the desired result.
So what? What to do? Considering that
:
PrezzoOpzione = f (stock price, strike price, time, implied volatility, interest rate)

I use this simplification mnemonic:
P = VI + I * t
(I know now that everything will turn up their nose)
I need to remember that the option price depends on the intrinsic value (VI), that 'the difference between the price of the underlying and the strike price, the implied volatility (vi) and the remaining time before the expiry of the option.
I know that the option price and the Underlying are not related in a linear (otherwise the formula would be reversed), but as I say, is a simplification that helps me to be considered as impacting on the price of the option, the three variables most important (not counting the interest rate for convenience).
From this simplified formula can be deduced immediately, for example, that a small variation of "there" affects much more than the price of an option to expire 60 days which expired on 30 days, with the same strike price and below., while a change in VI, impact equally on all options with the same strike but different maturities.

And the theoretical price of the model? Well, that's certainly useful to know if the option is below (or above) the price and I need a sotware to calculate it (those of you who do square roots by hand?:)), But in the end, as always ... is the market that decides!


PS: follow up post as the price is influenced by the variables depending on the strike price (ATM, OTM, ITM)

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