Option pricing calculator

To learn more about options, check out this module on Varsity.The FrameworkIn this three part series, we introduced the Option Greeks in the first post. In the second post, we discussed the practical Application of Option Greeks with respect to options trading.In this concluding post, we will understand the usage of an option calculator. An option calculator is a tool which helps you calculate the Greeks, i.e., the delta, gamma, theta, vega, and rho of an option. Along with the calculation of the option Greeks, the option calculator can also be used to calculate the theoretical price of an option (also called fair value of an option’s premium) and the implied volatility of the underlying.The option calculator uses a mathematical formula called the Black-Scholes options pricing formula, also popularly called the ‘Black-Scholes Option Pricing Model’. This is probably the most revered valuation model in Economics, so much so that its publishers (Robert C. Metron and Myron Scholes) received a Nobel Prize in Economics in 1997.Briefly, the framework for the pricing model works like this:We feed the model with a bunch of inputsInputs include: Spot price, Interest rate, Dividend, and the number of days to expiry. Along with these mandatory inputs, we also input either the price of the option or the implied volatility of the underlying, but not both.The pricing model churns out the required mathematical calculation and gives a bunch of outputsThe output gives us the value of Option Greeks. Along with the Option Greeks, we also get one of the following:The Implied volatility of the underlying, provided one of the input is the option price orThe theoretical value of option’s premium, provided the input is the implied volatility of the underlyingThe illustration below gives the schema of a typical options calculator:Let us inspect the input side:Spot Price – This is the price at which the underlying is trading. Note, we can even replace the spot price by the futures price. We use the futures price when the option contract is based on futures as its underlying. Usually, commodity and in some cases currency options are based on futures. For equity option contacts, always use the spot price.Interest Rate – This is the risk-free rate prevailing in the economy. Use the RBI 91 day Treasury bill rate for this purpose. As of September 2014, the prevailing rate is 8.6038% per annum.Dividend – This is the dividend expected per share

When it comes to options trading, precision is key. An options calculator is an essential tool that helps traders assess potential profits, losses, and risks before entering a trade. By inputting variables like strike price, expiration date, implied volatility, and interest rates, traders can estimate an option's theoretical value and determine whether a trade aligns with their trading strategy.How an Options Calculator Works?Options calculators use complex mathematical models like the Black-Scholes Model or the Binomial Pricing Model to evaluate option pricing. These models consider factors such as time decay, volatility, and interest rates to provide traders with an accurate picture of potential market movements.Why Every Trader Needs an Options Calculator?Risk Management – By analyzing potential losses and gains, traders can adjust their trading strategy accordingly.Profit Estimation – Knowing the expected value of an option before trading helps traders make informed decisions.Strategy Optimization – Whether you are using a covered call, straddle, or iron condor, an options calculator can refine your approach.Using an options calculator isn't just about crunching numbers—it’s about refining your trading strategy for maximum profitability.

A free app for Android, by App Developers Ltd.Craft Pricing Calculator is a handy app that can calculate the price of your handmade items. It's designed for people who want to sell their creations.To start with, you need to download the app.It's very easy to use and you simply need to enter the cost of your materials, the number of items you made, and how long it took you to make them.It will then show you how much each item costs to make and what you should be charging to break even or make a profit.The app supports multiple currencies. It also supports profit markup. You can set the profit markup as a percentage or as a fixed amount.Program available in other languagesUnduh Craft Pricing Calculator [ID]ダウンロードCraft Pricing Calculator [JA]Craft Pricing Calculator 다운로드 [KO]Pobierz Craft Pricing Calculator [PL]Scarica Craft Pricing Calculator [IT]Ladda ner Craft Pricing Calculator [SV]Скачать Craft Pricing Calculator [RU]Download Craft Pricing Calculator [NL]Descargar Craft Pricing Calculator [ES]تنزيل Craft Pricing Calculator [AR]Download do Craft Pricing Calculator [PT]Craft Pricing Calculator indir [TR]ดาวน์โหลด Craft Pricing Calculator [TH]Craft Pricing Calculator herunterladen [DE]下载Craft Pricing Calculator [ZH]Tải xuống Craft Pricing Calculator [VI]Télécharger Craft Pricing Calculator [FR]Explore MoreLatest articlesLaws concerning the use of this software vary from country to country. We do not encourage or condone the use of this program if it is in violation of these laws.

In the stock, provided the stock goes ex-dividend within the expiry period. For example, today is September 11 and you wish to calculate the option Greeks for the ICICI Bank option contract. Assume ICICI Bank is going ex-dividend on September 18 with a dividend of Rs. 4. The expiry for September series is September 25. In this situation you need to give an input of Rs. 4.Number of days to expiry – This the number of calendar days left to expiry.Volatility – This is where it gets a little confusing, so I suggest you pay extra attention. As mentioned earlier, along with option Greeks you can use the option calculator to calculate either the implied volatility of the underlying or the theoretical option price but not both at the same timeIf you wish to calculate the theoretical option price as one of the desired outputs, then volatility has to be one of the inputs. For Nifty option contracts, use the India VIX index value. Alternatively, if you have a view on volatility from today to expiry, you can input that as well. You can do the same thing for stocks.Option Price, also called the ‘Actual Market Value’ – If you wish to calculate the implied volatility of the underlying you need to input actual market value data. The actual market data is simply the price at which the option is trading in the market.Once these inputs are fed to Black-Scholes option pricing model, the model churns out the math to give us the required output. The logic on which Black-Scholes model works is quant heavy involving concepts of stochastic calculus. For a quick introduction on the working of a Black-Scholes model, I’d encourage you to watch this video.We get the following values on the output side:DeltaGammaThetaVegaRhoAlong with the Greeks, the output includes either the implied volatility of the underlying or the theoretical option price.Option Calculator on Zerodha Trader (ZT)Keeping the above framework in perspective, let us explore the Option Calculator on Zerodha Trader (ZT). To invoke the option calculator, click Tools –> Option Calculator as shown below. Or you can simply place your cursor on an option scrip and use the shortcut key Shift+O.This is how the calculator appears on the terminal:The calculator can be broken down into three sections as shown in the image below:The top section highlighted in blue is used to select the option contract, this is