Ticket Pricing

The process of estimating the ticket price, in this context, can be understood as a scaling or normalization procedure applied to the calculated option prices. The idea is to make these prices more approachable and relevant to everyday users, by scaling them to a range that corresponds more closely with the kind of prices users would expect to pay.

Here's a bit more context to explain how this works:

When the Black-Scholes model calculates an option's theoretical price, the intersection of Call and Put option is calculated and the resulting value is then used. The value might be quite large or small, given the potentially high value of the underlying assets and the factors that affect the option's price. For an ordinary individual looking to participate in the market, these prices might be prohibitively high or simply difficult to understand.

The 'ticket' is a concept introduced to bridge this gap. A ticket can be understood as a representation of the option contract, but with its price scaled to a more manageable range. In a way, the ticket is a version of the option, maintaining the same relationship between different option prices, but expressing them in a more relatable scale. To calculate the ticket price, the system first interpolates Call and Put functions and finds an intersection point, which serves as a base value which is scaled later on.

Essentially, the system performs a transformation that adjusts the decimal points of the option price. If the option price is a very small number, the system will move the decimal point to the right, effectively multiplying the option price by a certain factor, to convert it into a more understandable ticket price. Conversely, if the option price is a very large number, the system will move the decimal point to the left, effectively dividing the option price by a certain factor, to make it more manageable.

The goal of this transformation process is to normalize the range of possible prices, ensuring that ticket prices fall within the range (<1.0, 10.0), regardless of the value of the underlying option. It allows users to better understand ticket pricing by presenting them in a more easily comparable and comprehensible format.

So essentially, the ticket pricing algorithm keeps the relative differences in the option prices intact while ensuring that the ticket prices fall within a predefined, user-friendly range.