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iPhone Cases sale How can we find that magic Fair Value for an option contractThe key term here is the "expectancy" in a mathematical sense: expected value is equal to all possible future outcomes weighted by their probabilities. Therefore, to lead to the zero expected profit, that fair option value should be equal to the expected price (payoff) at the expiration.In short, a derivative's Fair Value is equal to its all possible values on the expiration date weighted by their probabilities:The Fair Value is equal to the shaded area on the lower diagram.Mathematically speaking, it is actually an integral of the multiplication of two functions: the payoff and the probability density.The payoff event is expected to occur at some future point. Therefore, the final step is to calculate the present value of the Fair Value to make it comparable to the current market price.iPhone Cases sale

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