My option pricing spreadsheet will allow you to price European call and put options using the Black and Scholes model. Understanding the behavior of option prices in relation to other variables such as underlying price, volatility, time to expiration etc is best done by simulation. When I was first learning about options I began building a spreadsheet to help me understand the payoff profiles of calls and puts and also what the profiles look like of different combinations.
I've uploaded my workbook here and you're welcome to it. On the "basic" worksheet tab you will find a simple option calculator that generates fair values and option Greeks for a single call and put according to the underlying inputs you select. The white areas are for your user input while the shaded green areas are the model outputs. Underneath the main pricing outputs is a section for calculating the implied volatility for the same call and put option.
The PayoffGraphs tab gives you the profit and loss profile of basic option legs; buy call, sell call, buy put and sell put. You can change the underlying inputs to see how your changes effect the profit profile of each option. Again, use the while areas for your user input while the shaded areas are for the model outputs. Use this Excel formula for generating theoretical prices for either call or put as well as the option Greeks:.
If you're having troubles getting the formulas to work, please check out the support page or send me an email. If you're after an online version of an option calculator then you should visit Option-Price. Just to note that much of what I have learnt that made this spreadsheet possible was taken from the highly acclaimed book on financial modeling by Simon Benninga - Financial Modeling - 3rd Edition.
If you're an Excel junkie, you'll love this book. There are loads of real world problems that Simon solves using Excel. The book also comes with a disk that contains all the exercises Simon illustrates. You can find a copy of Financial Modeling at Amazon of course. Hi Luciano, 1 The spreadsheet here calculates the option greeks. Hello Peter, I got two questions. Is the "total" delta the sum of the single legs deltas?
Thank you and regards. Hi Mike, Thanks for the feedback, appreciate it! I see what you mean, however, as stocks don't carry a contract size I left this out of the payoff calculations. Instead, the correct way to account for this when comparing stocks with options is to use the appropriate amount of shares that the option represents i. If you were to use 1 for 1 it would imply that you only bought 1 share. Up to you though Is this what you mean I hope I've not misunderstood you?
FYI, You have an error in your spread sheet depending on how you look at it. It involves the theoretical graph vs the payoff graph with a stock position involved.. For your payoff you id the leg as stock and do not use the option multiplier. For the theo and greek graph you always multiplying by the "multiplier" even for stock legs so your calculations are off by a factor of the "multiplier". PS Do you still maintain this? I have expanded it and can contribute if you are.
Hi Clark, The arrows change the Date Offset value in cell P3. This enables you to view the changes to the theoretical value of the strategy as each day passes.
Hi Denis, I used 5 just to ensure there was enough buffer to handle high volatilities. But, of course, you're welcome to change the upper value if a lower number improves performance for you. I just used 5 for ample room.
Regarding the historical volatility, I would say the typical use is close to close. Take a look at my Historical Volatility Calculator for an example. I know it doesn't make much difference to speed, but I tend to be pretty precise when it comes to programming.
On another note, I am having a hard time figuring out what Historical Volatility of the underlying assets. Hi Jack, Thanks for posting! I appreciate you posting the numbers in the comment, however, it's hard for me to make sense of what is going on.
Is it possible for you to email me your Excel sheet or modified version of to "admin" at this domain? I'll take a look and let you know what I think. Sir, In the Option Trading Workbook. I changed the underling price and strike price to calculate the IV, as below. When the market price was changed from to , why the IV was changed so dramatically? I like your web and excel workbook very much, they are the best in the market! Thank you very much! There is a formula only version on this page; Black Scholes Let me know if this works.
I tried the spreadsheet in Openoffice, but it did not work. Does that use Macros or imbedded functions? I was looking for something without macros, since my openoffice does not usually work with Excel macros. Thanks for any possible help. Can you please let me know how we can calculate Risk Free Rate in case of USDINR Currency Pair or any other pair in general. Hi Max, Mmm, not really. You can change the volatility back and forth but the current implementation doesn't plot greeks vs volatility.
You can check out the online version; Option-Price. Hello, what a great file! I am trying to see how the volatility skew affects the greeks, is it possible to do this on the OptionsStrategies page?
Hi Wong, Yes, your numbers sound right. What worksheet are you looking at and what values are you using? Perhaps you could email me your version and I can take a look? It should be made of two straight lines,joined at the strike price, right?
I didn't want to graph it as it would just be a flat line across the graph. You're welcome to add it though - just email me and I'll send you the unprotected version. Sorry, I reread my question and it was confusing.. I'm just wondering if there is a way to also throw in Avg Volatility into the graph? Hi Ryan, Not sure if I understand correctly. The current volatility is what is graphed - the volatility calculated each day for the time period specified. Hi, Great volatility spreadsheet..
I'm wondering if its at all possible to track what the 'current' volatility is. Meaning just like your Max and Min are plotted on the chart, is it possible to add current, so we can see how its changed? If its not at all possible, do you know a program or willing to code this? Hi Desmond, The VBA is unlocked - just open the VBA editor and all of the formulas are there.
Hi Steve, No, not yet, however, I found this site, which seems to have one; Binary Options Excel Let me know if it's what you're after. Terrific spreadsheets - thanks much! Do you by any chance have a way to calculate theo prices for the new binary options daily expriations based on the Index futures ES, NQ, etc.
Thank you so much for your current spreadsheets - very easy to use and so so helpful. Hi Vlad, Thanks for writing. Greetings, I would like to know how you calculated the theta on a basic call option. I virtually got the same answers to you but the theta in my calculation is way off.
Here are my assumptions.. Thank you for taking the time to read this, look forward to hearing from. Hi Zoran, Margin and premium are different. A margin is a deposit that is required to cover any losses that may occur due to adverse price movements.
For options, margins are required for net short positions in a portfolio. The amount of margin required can vary between broker and product but many exchanges and clearing brokers use the SPAN method for calculating option margins. If your option position is long, then the amount of capital required is simply the total premium paid for the position - i. For futures, however, a margin typically called "initial margin" is required by both long and short positions and is set by the exchange and subject to change depending on market volatility.
Hello, as I am new in trading options on futures please explain to me how to calculate margin, or daily premium, on Dollar Index, as I saw on the ICE Futures US web page, that the margin for the straddle is only Dollars.
It is so cheap that if I bought call and put options with the same strike, and form the straddle, it is look profitable to exercise early one leg of the position? I have in my account dollars. They have a free trial though so you can see if it is what you need. Hi , Any one knows how we can get FTSE index Historical volatility Regards, B. Hi Darong, I don't think VWAP is used by option traders at all You would need accurate access to all the trade information in order to calculate it yourself so I would say that traders would obtain it from their broker or other vendor.
Hi Peter, I have a quick question as I just started to study Options For VWAP, normally, do option traders calculate it by themselves or tend to refer to calculated value by information vendors, or etc.? I want to know about market convention from traders' perspectives as a whole for option trading. Appreciate if you revert to me.
Hi Amitabh, I suppose for short term trading the payoffs and strategy profiles become irrelevant. You'll just be trading off short term fluctuations in price based off expected movements in the underlying.
Hi Peter How can this good work of yours be used for intraday or short term trading of options as these options make short-term tops and bottoms. Any strategies for same? Warm wishes Amitabh Choudhury [email removed]. First time I am going through any useful write up on option trading. But have to make an indepth study to enter into trading. Hi Peter, I have to say your website is great ressource for option trading and carry on. I was looking for your worksheet but for forex underlying instrument.
I saw it but You don't offer to download. Do you mean an example of the code? You can see the code in the spreadsheet. It is also written on the Black Scholes page. You can open the VBA editor to see the code used to generate the values. Alternatively you can look at the examples on the black scholes model page. Hi, How is it that I can see the actual formula behind the cells that you have used to obtain the data?
Thank you in advance. Hi Amit, is there an error that you can provide? What OS are you using? Have you seen the Support Page? Indian man trading today Found spreadsheet but does work? Look at it and needs fix to fix problem? Dear Sir , thanks for the reply.. Hello Sir, I am looking for some options hedge strategies with excels for working in Indian markets Ok, I see now. In Open Office you must first have JRE installed - Download Latest JRE.
Let me know if this doesn't work.
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Thanks for your time. I was wondering if this spreadsheet can be opened with open office? If so how would i go about this? Hi NK, Whatever money costs you i. If you want to calculate the historical volatility for a stock then you can use my historical volatility spreadsheet. You will also need to consider dividend payments if this is a stock that pays dividends and enter the effective yearly yield in the "dividend yield" field. The prices don't have to match. If the prices are out, this just means that the market is "implying" a different volatility for the options than what you have estimated in your historical volatility calculation.
This could be in anticipation of a company announcement, economic factors etc. Hi, i'm new to options. I'm calculating the Call and Put premiums for TATASTEEL I used American Style options calculator. Date - 30 Sept, Strike price - Interest rate - 9.
Also plz tell me what to put for Interest rate and from where to get the volatility for particular stocks in calculation. The current price for the same options are CALL - 27 PUT - Why is there such a difference and what should be my trading strategy in these?
Implied Volatility Calculator
Yes, it is for European options so it will suit the Indian NIFTY index options but not the stock options. If you're a market maker, however, you would want something more accurate.
If you're interested in pricing American options you can read the page on the binomial model , which you'll also find some spreadsheets there. Hi Peter, Sorry for the confusion, but i am looking for some volatility formula only for futures trading and not options.
Can we use historical volatility in futures trading? Hi Gina, 15 points is the profit of the spread, yes, but you have to subtract the price that you have paid for the spread, which I assume is 5 - making your total profit 10 instead of Hi Mahajan, Do you mean options on futures or just straight futures?
The spreadsheet can be used for options on futures but is not useful at all if you are just trading outright futures. If you look at Dec PUTs for netflix - I have a put spread - short and long - why doesn't this reflect a profit of 15 instead of 10?
Hi Peter, First of all tons of thanks for providing the useful excel. I am very new to options previously i was trading in commodities futures. Can you please help me in understanding, how i can use these calculations for future trading silver,gold,etc?
If there is any link please provide me the same. Thanks again for enlightening thousand of traders. Hi Edwin, There isn't currently a sheet specifically for calendar spreads, however, you're welcome to use the formulas provided to build your own with the parameters needed. You can email me if you like and I can try and help you with an example. I am an active options trader with my own trade boob, I find your worksheet "Options Strategies quite helpful, BUT, can it cater for calendar spreads, I caanot find a clue to insert my positions when faced with options and fut contracts of different months?
Look forward to hearing from you soon. Hi Peter, many thanks. I had gone through the VB functions but they use many inbuild excel functions for calculations.
I wanted to write the program in Foxpro old time language which does not have the inbuild functions in it and hence was looking for basic logic in it. Never the less, the excel is also very useful, which i don't think anyone else has also shared on any site.
I went through the complete material on Options and you have really done a very good knowledge sharing on Options. You have really discussed in depth near about 30 strategies Hi Sunil, for Delta and Implied Volatility the formulas are included in the Visual Basic provided with the spreadsheet at the top of this page. For Historical Volatility you can refer to the page on this site on calculating volatility. However, I am not sure on the profit probability - do you mean the probability that the option will expire in the money?
Hi Peter, How do i calculate the following. I want to write a program to run it on various stocks at a time and do first level scanning.
Hi DevRaj, You can try my volatility spreadsheet that will calculate the historical volatility that you can use in the option model. Very useful nice article and the excel is very good Still one question How to calculate volatility using option price, spot price, time?
Hi Peter, I have just started using the spreadsheet provided by you for option trade. A wonderful easy to use stuff with adequate tips for easy usage. Thanks for your best efforts to help educate the society. Hi Karen, those are some great points! I am looking closely at a few option picking services right now and plan to list them on the site if they prove to be successful. Is your option trading not working because you haven't found that right system yet or because you won't stick to one system?
What can you do to find the right system and then stick to it? Could a lot of what is not working for you be because of how you are thinking? Your beliefs and mindset? Working on improving yourself will help all areas of your life. Sure, you can use implied volatility if you like.
Black Scholes Option Calculator
But the point of using a pricing model is for you have your own idea of volatility so you know when the market is "implying" a value different to your own. Then, you are in a better position to determine if the option is cheap or expensive based on historical levels. The spreadsheet is really more of a learning tool.
To use implied volatilities for the greeks in the spreadsheet would require the workbook to be able to query option prices online and download them to generate the implied volatilities. That's why I have unlocked the VBA code in the spreadsheet so that users can customize it to their exact needs. AnalyzerXL - they provide an Excel took that downloads option chains that you can use together with the option formulas in my spreadsheet.
The Greeks that are calculated on the OptionPage tab of OptionTradingWorkbook. Should not the Greeks be determined by Implied Volatility? Comparing the values of the Greeks calculated by this workbook produces values that agree with, e. It is the expected volatility that the underlying will realize from now until the expiration date.
Hi Madhuri, do you have Macros enabled? Please see the support page for details. Even when you first open the thing, the default values the creator put in don't even work" -madhuri. Finally a good site with a simple and easy to use spreadsheet! Guys, this works and it is pretty easy. Just enable macros in excel.
The way it has been put is very simple and with little understnading of Options any one can use it. The thing opened immediately for me, works like a charm.!!
I am so pleased that you referenced it Hi Peter, I need your help about the Asian option pricing using excel vba. I don't know how to write the code.
You sir, are an artist. One old hacker 76 years old - started on the PDP 8 to another. Hi Ken, Take a look at the following page: Hi, What if i am using the Office on Mac? Ok, it's working now. FYI, I had enabled all the macros in "Security of the macros". Can't wait to play with the file now I don't see the popup. I use Excel under Vista. The presentation is quite different from the previous versions. I enabled all macros. But I still get the name error. Hi Dissapointed, The spreadsheet requires Macros to be enabled for it to work.
Do you see a popup on the toolbar asking you if you want to enable this content?
Just click it and select "enable". Please send me an email if you need further clarification. Even when you first open the thing, the default values the creator put in don't even work. Option Pricing Spreadsheet My option pricing spreadsheet will allow you to price European call and put options using the Black and Scholes model.
Option Trading Workbook Understanding the behavior of option prices in relation to other variables such as underlying price, volatility, time to expiration etc is best done by simulation. Simplified On the "basic" worksheet tab you will find a simple option calculator that generates fair values and option Greeks for a single call and put according to the underlying inputs you select.
Implied Volatility Underneath the main pricing outputs is a section for calculating the implied volatility for the same call and put option. Payoff Graphs The PayoffGraphs tab gives you the profit and loss profile of basic option legs; buy call, sell call, buy put and sell put. Formulas Theoretical and Greek Prices Use this Excel formula for generating theoretical prices for either call or put as well as the option Greeks: Option Pricing Option Workbook XLS Black and Scholes Binomial Model Quick Pricing Formula Option Greeks Greeks Overview Option Delta Option Gamma Option Theta Option Vega Option Rho Option Charm.
Comments Peter February 19th, at 4: Luciano February 19th, at Peter January 12th, at 5: Mike C January 12th, at 6: Mike Peter December 14th, at 4: Clark December 14th, at 4: Peter October 7th, at 6: Denis October 7th, at 3: Peter June 10th, at 1: Jack Ford June 9th, at 5: Peter January 10th, at 1: Ravi June 3rd, at 6: Peter May 28th, at 7: Thank you Max Peter April 30th, at 9: Peter April 15th, at 7: Ryan April 12th, at 9: Peter April 12th, at Ryan April 10th, at 6: Thanks, Ryan Peter March 21st, at 6: Desmond March 21st, at 3: Steve December 16th, at 1: Regards, Vladmir Peter June 4th, at Sincerely, Zoran Peter May 21st, at 5: B May 21st, at 5: Darong April 3rd, at 3: Regards, pintoo yadav March 29th, at Amitabh March 15th, at Warm wishes Amitabh Choudhury [email removed] madhavan March 13th, at 7: Jean charles February 10th, at 9: Peter January 31st, at 2: Peter January 26th, at 5: The workbook is not opening P December 2nd, at Deepak November 17th, at Regards Peter November 16th, at 5: Deepak November 16th, at 9: Regards Peter October 30th, at 6: NEEL October 30th, at Peter October 5th, at Peter October 5th, at 5: Kyle October 5th, at 3: Peter October 4th, at 5: Are you having troubles with Open Office?
Kyle October 4th, at 1: Peter October 3rd, at NK October 1st, at Peter September 8th, at 1: Mehul Nakar September 8th, at 1: Regards, Mahajan Peter September 3rd, at 6: Peter September 3rd, at 6: Gina September 2nd, at 3: Gina Mahajan September 2nd, at 6: Cheers, Mahajan Peter August 26th, at 1: Edwin CHU HK August 26th, at Peter June 28th, at 6: Sunil June 28th, at Peter June 27th, at 7: Sunil June 27th, at Thanks Peter June 27th, at 6: Sunil June 26th, at 2: Peter June 18th, at 2: What do you mean?
DevRaj June 4th, at 5: Satya May 10th, at 6: Regards Satya Peter March 28th, at 4: Emma March 28th, at 7: Peter March 9th, at 9: Karen Oates March 9th, at 8: Peter January 20th, at 5: What pricing model do they use?
Peter January 19th, at 8: Even when you first open the thing, the default values the creator put in don't even work" -madhuri MD November 25th, at 9: Please answer rick November 6th, at 6: Dinesh October 4th, at 7: Peter January 3rd, at 5: Are Call Oprion Price graph data correct? Peter December 23rd, at 4: Song December 18th, at Peter November 12th, at 6: Wondering November 11th, at 8: Peter April 6th, at 7: Admin March 23rd, at 4: Even when you first open the thing, the default values the creator put in don't even work Add a Comment Name.