The publication of the Black-Scholes formula in 1973 removed the guesswork and reliance on individual brokerage firms from options pricing and brought it under a theoretical framework that is applicable to other derivative products as well. Implied Volatility - Volatility reflects the propensity of the underlying stock to fluctuate either up or down. Dividend Status - Larger dividends reduce call prices and increase put prices, because paying out a dividend reduces the stock price by the amount of the dividend.
Dividends increase the attractiveness of holding stock rather than buying calls and holding cash.
Conversely, short-sellers must pay out dividends, so buying puts is more desirable than shorting stock. Higher rates increase the underlying stock's forward price, which is the stock price plus the risk-free interest rate over the life of the option. The forward price is assumed by the model to be the value of the stock at option expiration. One of the major assumptions of the Black-Scholes formula is that stock price movement is random. We believe, however, that there is a trending bias in the market, whereby prices are dependent on each other over time.