After applying the two basic option pricing models, we give some theoretical background to them. We do not aim to give a detailed mathematical derivation, but we intend to emphasize (and then illustrate in R) the similarities of the two approaches. The financial idea behind the continuous and the binomial option pricing is the same: if we manage to hedge the option perfectly by holding the appropriate quantity of the underlying asset, it means we created a risk-free portfolio. Since the market is supposed to be arbitrage-free, the yield of a risk-free portfolio must equal the risk-free rate. One important observation is that the correct hedging ratio is holding underlying asset per option. Hence, the ratio is the partial derivative (or its discrete correspondent in the binomial model) of the option value with respect to the underlying price. This partial derivative is called the delta of the option. Another interesting connection between the two models...