Brian Lee
Jul 24, 2025
The Black-Scholes equation is a mathematical model used to estimate the price of European-style options. It helps traders understand how the price of an option is affected by factors like time, volatility, interest rates, and the price of the underlying stock. One of its key assumptions is that prices follow a normal distribution, which means most price changes are small and extreme changes are rare.
I believe it’s worth learning the Black-Scholes equation, especially if you’re interested in how options are priced. While I haven’t studied it deeply, I do know that it assumes stock prices follow a normal distribution. That idea gave me the inspiration to try a simpler approach in my own strategy.