The model is considered a classic example of an academic innovation that has been adopted widely in practice. The volatility of the option s underlying stock. Any stock s volatility can be predicted to an extent by the degree of volatility it has shown in the past. Wide fluctuations should increase the option s time value because they can raise its monetary worth but not drive it below zero. The liquidity of the option and the underlying stock.
Liquidity is important to investors.
If the option is for the stock of a closely held company, it will be discounted for lack of marketability. The time left until the option expires. The time left until the option expires makes a difference because a longer time gives the stock a greater chance to appreciate. Thus, a stock option with longer to go until expiration is worth more. Any dividends the company pays on the stock.