# Black Scholes Model in Python for Predicting Options Premiums

**Black Scholes in Python by Suhail Saqan**

A stock option is the right to buy or sell a stock at an agreed price and date. The two types of options used for different situations are either **calls**, betting a stock will increase in value , or **puts**, betting a stock will decrease in value (however this is not always true, discussed at the end). Each options contract represents 100 shares of that stock.

There are also two different styles for options: American and European. The calculations that will be done here are for European options.

## Black Scholes Model

The Black Scholes model is considered to be one of the best ways of determining fair prices of options. It requires five variables: the strike price of an option, the current stock price, the time to expiration, the risk-free rate, and the volatility.

**C **

*= call option price*

**N**

*= CDF of the normal distribution*

**S**

*t= spot price of an asset*

**K**

*= strike price*

**r**

*= risk-free interest rate*

**t**

*= time to maturity*

**σ**= volatility of the asset

**Assumptions Made for this Calculator**