At contract maturity the value of a put option is MAX(0, ST-X), where x equals the option's strike price and st is the stock price at contract expiration.
Investors should have a solid understanding of the variables affecting an option's value before entering the world of options trading. These include the price of the stock at the moment, its intrinsic worth, its remaining life or time value, volatility, interest rates, and any cash dividends that have been distributed.
These factors are used by a number of options pricing algorithms to calculate the option's fair market value. The Black-Scholes model is the most well-known of them.
Options are similar to other investments in many respects; in order to use them properly, you must comprehend what influences their pricing.
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