[Verse 1]
In the world of options trading there's a price to calculate
Binomial trees will show us how the value can fluctuate
One period or two periods we build the branches out
Risk neutral probability tells us what it's all about
[Chorus]
Put plus stock equals call plus strike discounted back today
That's the parity formula that never goes away
Delta gamma vega theta rho the Greeks will guide your way
Options pricing models help the traders make their play
[Verse 2]
Black-Scholes-Merton needs five inputs to make the magic work
Stock price strike and time to go with risk-free rate that lurks
Volatility's the fifth one and assumptions must be met
Constant volatility and rates, no dividends to get
[Chorus]
Put plus stock equals call plus strike discounted back today
That's the parity formula that never goes away
Delta gamma vega theta rho the Greeks will guide your way
Options pricing models help the traders make their play
[Bridge]
Delta measures price sensitivity to the underlying move
Gamma shows how delta changes as the stock price finds its groove
Vega captures volatility while theta counts the days
Rho responds to interest rates in all the different ways
[Verse 3]
Implied volatility comes from market prices that we see
When it varies by the strike we get a smile or skew you see
Replicating portfolios can match the option's flow
With stocks and bonds combined just right the arbitrage won't show
[Chorus]
Put plus stock equals call plus strike discounted back today
That's the parity formula that never goes away
Delta gamma vega theta rho the Greeks will guide your way
Options pricing models help the traders make their play
[Outro]
From binomial trees to Black-Scholes formulas
The Greeks and parity will guide us through
Options pricing mastery awaits for you