To begin with, an option is like any other financial instrument, should be completely understood what it is, why the price changes overnight. Moreover, it should be understood thoroughly before one start to trade them.
Contracts that allow investors the right to buy or sell an asset at a strike price on or before the maturity date are known as options. With options, you can benefit whether the stock rises, falls, or moves sideways in the future. Furthermore, options can be used to limit losses while protecting gains. However, if an investor does not fully comprehend option trading, he or she may suffer a significant loss.
This options calculator utilizing the Black-Scholes Model, the first commonly used model for option pricing, it can provide the call/put option price and Greek symbols to learn more about a stock option. It can help investors develop an option trading strategy.
- S = stock price / current stock price
- K = strike price
- R = risk-free rate
- T = time to maturity (denoted in days)
- V = implied volatility
- Stock call/put Option Price
- Delta: Intrinsic value of the underlying asset
- Gamma: Rate of change of delta
- Vega: change in volatility
- Rho: risk-free interest
- The underlying's risk-free rate and volatility are known and constant.
- It is only applicable to European options that can be exercised upon expiration.
- The underlying returns are normally distributed.
- There are no transaction or commission fees when purchasing the option.
- Stock exchanges are efficient. Market movement cannot be foreseen, and there is continual trade.
- Financial Derivative(Options, Futures, Foward, etc.)
- Deriving Black-Scholes formula
- Importance of Implied Volatility
- Option Greeks