The Strategy Builder (/trade/strategies)
Build and price multi-leg strategies — and know what the model assumes
/trade/strategies is where option ideas become priced structures. Start from one of the twelve templates — spreads, straddles, strangles, iron condors, butterflies — or bring legs over from the chain, and the ticket prices the package: net debit or credit, max profit, max loss, breakevens, probability of profit, and the net Greeks. Under the hood the ticket prices with Black-Scholes-Merton.
Knowing what that model assumes — and what it misses — is the difference between reading the ticket and believing it blindly. Black-Scholes-Merton (BSM) is the baseline option pricing model — published independently by Fischer Black & Myron Scholes and Robert Merton in 1973, foundational text in financial economics. Its key assumptions: constant volatility, lognormally-distributed returns, no jumps, continuous trading, no transaction costs.
These assumptions are wrong in important ways, but they're wrong in calibrated, predictable ways — which means BSM still works as a baseline that you adjust for the specific shortcoming you're concerned about.
That is the opening. Finishing a lesson is where it stops being interesting and starts being useful: the full lesson runs to 5 sections and ends with 3 practice questions. A free account is what opens the rest, and the other 255 lessons in the Academy with it. No card.
What this lesson covers
- 1The model space — what each one captures that BSM misses
- 2The model hierarchy — when does each become necessary?
- 3Black-Scholes-Merton 1973 — the model that built modern derivatives markets
- 4Where to see this on the platform
- 5Summary