Archive for the ‘Option Pricing’ Category

What is theoratical option price?

This item was filled under [ Knowledge, Option Pricing ]

Theoretical price is nothing but a theoretical value. Options price depends on many variable like remaining life of option, current volatility, current interest rate etc.. There are various models that use above variables and give us the ideal price for an option. While theoretical value gives us good idea about what to pay for an […]

Continue reading...

Understanding Options Delta

This item was filled under [ Knowledge, Option Pricing ]

Here are some of the thumb rules that will help you understand Option Greek - Delta – - Delta is the measure of Change in Option Premium with respect to one Unit move of Underlying. – For ease of understanding, the value of Delta ranges between 0 to 1. As it can have the sign of +ive […]

Continue reading...

What parameters to use in Black-Scholes Calculator ?

This item was filled under [ FAQ, Option Pricing ]

For calculating option price, Black-Scholes model is one of the most popular one. This uses following parameters to calculate the premium (or current fair value) of option 1) Price of Underlying 2) Option strike Price 3) Days Until Expiration 4) Risk free Interest Rate 5) Dividend Yield 6) Historical Volatility Users are often confused about […]

Continue reading...