Explore the fundamentals of options markets in this comprehensive lecture from Yale University's Financial Markets course. Delve into core concepts including call and put options, the put-call parity, and option pricing models like the Binomial Asset Pricing model and Black-Scholes formula. Examine the theoretical and behavioral purposes of options, analyze graphical representations of option values, and understand the role of derivatives markets. Investigate the concept of implied volatility through the VIX index and compare it to actual market volatility. Conclude with insights into innovative applications of options in the housing market, providing a thorough understanding of this crucial financial instrument.