All termsOption Pricing and ValueStart here
Theoretical Value
Theoretical value is an estimate of what an option should be worth according to an option pricing model and its inputs.
Why it matters to you
The market price and theoretical value of an option do not always match exactly. Theoretical value gives traders a reference point for analyzing whether an option's current market price appears relatively expensive or cheap under a particular set of assumptions. It is a model output, not a guaranteed correct price.
Terms that sit next to this one
Pricing Model, Option Premium