An important concept in finance is the theoretical prices generated by an option pricing model. These models, such as the Black-Scholes model, use mathematical equations to estimate the value of an option. They take into account factors such as the underlying asset's price, the strike price, and the time until expiration. By understanding these models, investors can make informed decisions when trading options. It is crucial to note that these theoretical prices are not always accurate, but they serve as a helpful tool in the valuation of options.
