The inputs to the Option Calculator are:
- Price - the underlying stock price
- Strike - the strike price of the option
- Expiration - the expiration month and year
- Historical Volatility - the historical volatility, based on 1 year of price data for the underlying security
- Risk Free Interest Rate - the prevailing risk free rate
- Annual Yield - the annualized yield of the all regular dividends for the underlying stock. Note: when preloading data, the annual yield may include irregular dividends. Anticipated dividends which have not been declared are assumed to occur on approximately three months after the last dividend. Change this value to adjust for irregular dividends.
- Next Ex-Dividend Date - the approximate next ex-dividend date. When the last declared dividend is in the past the next ex-dividend is estimatred to occur 3 months after the last declared date. Change this value to adjust for irregular dividends. The format for the ex-dividend date is "YYYY-MM-DD".
Input items may be preloaded into the calculator using recent data for a selected symbol. To preload the input fields, enter the symbol of an underlying stock or index into the Symbol field and click the "Load Symbol Data" button.
The options calculator will use this data to compute a series of theoretical prices and chart the results.
Individual input items can be modified and the chart can be recomputed. Click the "Calculate" button to use the modified input data to recompute data points and display a new chart.
The default chart shows the theoretical price for the current day, and each subsequent theoretical price through expiration.
Alternately, a data series may be selected by choosing one of the following values from the "Solve For" menu:
- Price Change - shows the theoretical price as the price changes . The price will range from 70% to 130% of the price specified in the price field. Change the value in the price field to get a different range of prices.
- Volatility Change - show the theoretical price as the historical volatility changes. The volatility will range from 70% to 130% of the volatility specified in the Historical Volatility field.
- Days to Expiration - shows the theoretical price as expiration approaches. The range of dates can be adjusted by selecting a different expiration date.
- Strikes - the theoretical price is displayed for strike prices varying from 70% to 130% of the selected strike price.
- Interest Rate - theoretical prices are charted for interest rates ranging from 1 to 11% in 1/4 point intervals. This is not configurable. Rates are entered as a percentage, i.e. 3.5 represents an annual risk free interest rate of 3.5%.
- Annual Yield - theoretical prices are charted for the current day through the selected expiration date, assuming a constant dividend equal to 1/365 of the specified dividend yield will be returned each day until the option expires.
Prices are computed using the Black Scholes model. If an ex-dividend is specified for a call, the Roll, Geske, Whaley method for determining the value of an option with a single discrete dividend is used.
Be sure to read the Disclaimer.