(A veteran would look at other ways the curves respond to other changes, but I feel the most useful thing for a beginner to internalize is how the curves respond to ... imminent expiration.)
Each curve is a rang-of-possibility curve since the x-axis is the (possible range of) current underlier prices.
Each curve is a rang-of-possibility curve since the x-axis is the (possible range of) current underlier prices.
-- the forward contract's price
As expiration approaches, ...
As expiration approaches, ...
the curve moves closer to the (terminal) payout graph -- that straight line crossing at K.
-- the soft hockey-stick i.e. "option price vs current underlier"
As expiration approaches, ...
Also the asymptote is the forward contract's price curve, as described above.
As expiration approaches, ...
See diagram in http://www.saurabh.com/Site/Writings_files/qf301_greeks_small.pdf
As expiration approaches, ...
As expiration approaches, ...
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