Options Glossary

Glossary: Black-Scholes

Last Updated: May 11, 2015



What Does Black-Scholes Mean in Options Trading?

The Black–Scholes or Black–Scholes–Merton model is a mathematical model used to estimate the price of European Style derivatives, including options contracts. The model forms the basis of the Black-Scholes formula, which can be rewritten in different forms to solve for various options trading parameters. Black-Scholes led to a boom in options trading. Black-Scholes is widely used in options trading, often with adjustments and corrections.
The estimations of the Black-Scholes model has multiple times been proven to be close to the observed options prices. Many factors affect how close the model is to actual prices, including market efficiency and options liquidity.
OptionAutomator's Brutus Options Screener uses modified Black-Scholes models extensively to quantify various options parameters to provide the best options trades against your criteria.

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