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Option Calculators User Manual

Option Calculators provide means for implied volatility calculation, option contracts pricing and

calculation of option price sensitivities (greeks). Currently, through our website you can access

there different Option Calculators:

Basic Equity Option Calculator - using end of day data by default.

Live Equity Option Calculator - using live option and underlying security quotes.

Basic Futures Option Calculator (part of Advanced Futures Options service) - using end of day data.

Each Option Calculator enables you:

• Forecast option’s theoretical value and calculate sensitivities (greeks) based on the volatility

you consider fair. In Live Calculator you can use 20-minutes delayed volatility here (see

below)

• Calculate implied volatility of exchange-traded options using 20-minutes delayed bid/ask

quotes (Live version) or end of day data

• Perform these calculations for any not listed option with custom parameters based on your

input data

Follow the links above to see examples of each scenario or read general field-by-field description of

the service first.

General Description

The calculator screen consists of three parts: Input data (left of the screen), Output Price and greeks

data (right) and Volatility Calculation (bottom right). Once you enter underlying or option symbol

in the symbol box at the top and press ‘Go’ button, input parameters will be populated with default

values.

Input Data

Field

Description

Style

Option calculator uses two different pricing models, Cox-Ross-

Rubinstein binomial tree for American style options and Black-

Scholes pricing model for European style options (mostly Index

options)

Price

Stock Last Price/Index Value (20-minutes delayed in Live version)

Strike

Option strike; nearest to at-the-money strike is set by default

Expiration Date

Option expiry; closest expiry set by default

Days to Expiration

Days remaining to expiry; you can change this to analyze a non-

standard option or perform what-if analysis

Volatility %

Default implied volatility is yesterday’s end-of-day implied

volatility (average for Call and Put)

Interest Rate %

The interest rate used is derived from last night's treasury market

and is interpolated to conform to option's expiration term. We take

LIBOR for terms up to one year inclusive and ISDA (R) Swaps IR

par mid rate for terms above one year.

Dividend Date

Ex-date of next announced or last paid regular dividend

Dividend Amount

Dividend amount

Dividend Frequency

Frequency of regular dividend payments

Dividend Yield

Calculated from stock dividend data

Dividend data can be inputted for equity only. For futures options, you'll be able to enter futures

expiry of course.

Output Price and greeks data

Field

Description

Symbol

Shows the option symbols corresponding to inputted expiry and

strike

Option Value

The Option Value calculated by IVolatility calculation engine

Bid/Ask

20-minutes delayed market bid/ask quote for your reference,

provided by IVolatility ticker plant - shown only in Live Calculator

Delta

Change in option price corresponding to $1 change in the

underlying price

Gamma

Change in Delta corresponding to $1 change in the underlying price

Theta

Change in option price as one day passes

Alpha

Alpha is a ratio of Gamma over Theta

Vega

Change in option price corresponding to 1% (absolute) change in

the volatility

Rho

Change in option price corresponding to 1% (absolute) change in

the interest rate

Alpha and Rho greeks are calculated in equity calculators only. For futures options, we always

calculate futures greeks (with regard to futures price), not spot greeks. If you are confused with

greeks, you can read more about them here: http://www.ivolatility.com/news.j?nid=84

Below we list show some popular use cases for the Live Calculator service.

Option theoretical value and greeks calculation using custom volatility

value

To calculate option’s theoretical value based on your assumption of implied volatility, do the

following:

1. Type in the symbol box your equity and press ‘Go’.

2. Choose expiration in the dropdown box.

3. Choose the strike.

4. Enter the value of implied volatility you consider fair in Volatility % box in the left side of

the screen. If you wish to use 20-minutes delayed volatility here, see below (only for equity

Live Calculator).

5. Press ‘Calculate’ button and see theoretical value for Call and Put in 'Option Value' boxes to

the right; you'll also see live market bid/ask quotes in 'Bid/Ask' boxes. Greeks values will be

calculated as well.

Intraday implied volatility calculation for an exchange-traded option

To calculate implied volatility of option using 20-minutes delayed bid and ask quotes (only in

equity Live Calculator), do the following:

1. Type in the symbol box your equity and press ‘Go’.

2. Choose expiration in the dropdown box.

3. Choose the strike.

4. Press ‘Calculate’ button in the middle of the screen.

5. Now you'll see 20-minutes delayed bid/ask values at the right side of the screen (‘Calculate’

button not only calculates theoretical value and greeks, but also retrieves live option quotes

from the market).

6. Take ‘live’ (bid+ask)/2 of call or put, depending which one you need and place in the

‘Option price’ box at the bottom right.

7. Choose call/put type of option in corresponding dropdown menu.

8. Press ‘Calculate’ button below at the bottom right and see 20-minutes delayed implied

volatility value in 'Vola %' box.

Calculations using non-standard parameters

You can perform implied volatility or theoretical price and greeks calculation for any non-standard

option traded on the OTC market. All the input fields are customizable, so just enter all the required

data as per contract specification and perform calculations exactly as described above. One hint - to

select non-standard expiry, enter corresponding value into 'Days to Expiration' box ('Expiration

Date' box will always show 'FLEX' for non-standard expiry).

Option Calculators provide means for implied volatility calculation, option contracts pricing and

calculation of option price sensitivities (greeks). Currently, through our website you can access

there different Option Calculators:

Basic Equity Option Calculator - using end of day data by default.

Live Equity Option Calculator - using live option and underlying security quotes.

Basic Futures Option Calculator (part of Advanced Futures Options service) - using end of day data.

Each Option Calculator enables you:

• Forecast option’s theoretical value and calculate sensitivities (greeks) based on the volatility

you consider fair. In Live Calculator you can use 20-minutes delayed volatility here (see

below)

• Calculate implied volatility of exchange-traded options using 20-minutes delayed bid/ask

quotes (Live version) or end of day data

• Perform these calculations for any not listed option with custom parameters based on your

input data

Follow the links above to see examples of each scenario or read general field-by-field description of

the service first.

General Description

The calculator screen consists of three parts: Input data (left of the screen), Output Price and greeks

data (right) and Volatility Calculation (bottom right). Once you enter underlying or option symbol

in the symbol box at the top and press ‘Go’ button, input parameters will be populated with default

values.

Input Data

Field

Description

Style

Option calculator uses two different pricing models, Cox-Ross-

Rubinstein binomial tree for American style options and Black-

Scholes pricing model for European style options (mostly Index

options)

Price

Stock Last Price/Index Value (20-minutes delayed in Live version)

Strike

Option strike; nearest to at-the-money strike is set by default

Expiration Date

Option expiry; closest expiry set by default

Days to Expiration

Days remaining to expiry; you can change this to analyze a non-

standard option or perform what-if analysis

Volatility %

Default implied volatility is yesterday’s end-of-day implied

volatility (average for Call and Put)

Interest Rate %

The interest rate used is derived from last night's treasury market

and is interpolated to conform to option's expiration term. We take

LIBOR for terms up to one year inclusive and ISDA (R) Swaps IR

par mid rate for terms above one year.

Dividend Date

Ex-date of next announced or last paid regular dividend

Dividend Amount

Dividend amount

Dividend Frequency

Frequency of regular dividend payments

Dividend Yield

Calculated from stock dividend data

Dividend data can be inputted for equity only. For futures options, you'll be able to enter futures

expiry of course.

Output Price and greeks data

Field

Description

Symbol

Shows the option symbols corresponding to inputted expiry and

strike

Option Value

The Option Value calculated by IVolatility calculation engine

Bid/Ask

20-minutes delayed market bid/ask quote for your reference,

provided by IVolatility ticker plant - shown only in Live Calculator

Delta

Change in option price corresponding to $1 change in the

underlying price

Gamma

Change in Delta corresponding to $1 change in the underlying price

Theta

Change in option price as one day passes

Alpha

Alpha is a ratio of Gamma over Theta

Vega

Change in option price corresponding to 1% (absolute) change in

the volatility

Rho

Change in option price corresponding to 1% (absolute) change in

the interest rate

Alpha and Rho greeks are calculated in equity calculators only. For futures options, we always

calculate futures greeks (with regard to futures price), not spot greeks. If you are confused with

greeks, you can read more about them here: http://www.ivolatility.com/news.j?nid=84

Below we list show some popular use cases for the Live Calculator service.

Option theoretical value and greeks calculation using custom volatility

value

To calculate option’s theoretical value based on your assumption of implied volatility, do the

following:

1. Type in the symbol box your equity and press ‘Go’.

2. Choose expiration in the dropdown box.

3. Choose the strike.

4. Enter the value of implied volatility you consider fair in Volatility % box in the left side of

the screen. If you wish to use 20-minutes delayed volatility here, see below (only for equity

Live Calculator).

5. Press ‘Calculate’ button and see theoretical value for Call and Put in 'Option Value' boxes to

the right; you'll also see live market bid/ask quotes in 'Bid/Ask' boxes. Greeks values will be

calculated as well.

Intraday implied volatility calculation for an exchange-traded option

To calculate implied volatility of option using 20-minutes delayed bid and ask quotes (only in

equity Live Calculator), do the following:

1. Type in the symbol box your equity and press ‘Go’.

2. Choose expiration in the dropdown box.

3. Choose the strike.

4. Press ‘Calculate’ button in the middle of the screen.

5. Now you'll see 20-minutes delayed bid/ask values at the right side of the screen (‘Calculate’

button not only calculates theoretical value and greeks, but also retrieves live option quotes

from the market).

6. Take ‘live’ (bid+ask)/2 of call or put, depending which one you need and place in the

‘Option price’ box at the bottom right.

7. Choose call/put type of option in corresponding dropdown menu.

8. Press ‘Calculate’ button below at the bottom right and see 20-minutes delayed implied

volatility value in 'Vola %' box.

Calculations using non-standard parameters

You can perform implied volatility or theoretical price and greeks calculation for any non-standard

option traded on the OTC market. All the input fields are customizable, so just enter all the required

data as per contract specification and perform calculations exactly as described above. One hint - to

select non-standard expiry, enter corresponding value into 'Days to Expiration' box ('Expiration

Date' box will always show 'FLEX' for non-standard expiry).