Stochastic Volatility and Options Pricing

Option is a crucial phenomenon for investors to make profitable moves in their trades. They need to know at which price they should trade stocks, i.e underlying securities. Options are derivative contracts giving the holder the right of buying or selling shares of a stock at a price (strike or exercise) upon which both parties(writer and holder) agree. Depending on the strategy, option trading can provide a variety of benefits, including the security of limited risk and the advantage of leverage. Another benefit is that options can protect or enhance your portfolio in rising, falling and neutral markets. In other words, options are one step before the stock trading. They are used to  minimize the loss of a prospective move an investor makes or they are used to maximize the profit of a prospective move an investor makes.