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Welcome to our Options Pricer. (JAVA Compliant Browser required. Netscape 3.0, or MSIE 3.0)

Embedded in it are price-to-volatility and volatility-to-price calculators to analyze american and european vanilla stock options. We plan to add more features to it in the near future. Comments and suggestions are welcome.

One application is to impute a fair option price from knowledge of the "fair" implied volatility of a stock. However, this latter value may be difficult to compute (for instance, one may use historical implied volatilities, but past behavior may not be a good predictor of the future). A more important usage is to compute the implied volatilities of two or more options on a stock having similar strikes/expirations, given their prices, and assess their relative value based on their implied volatilities. Another application is to compute horizon option prices using as inputs the same (or similar) implied volatility as the current (computed from the current stock price) and some guess of the horizon stock price. Good Luck!

NOTE:
You have to express the values in decimal points. Do not enter fractions! For example, 7 1/8 should be 7.125.

For an explanation of the fields, click here

For more about options, go to Larry McMillan's Option Strategist .


NOTE: When entering the Option Price, or the Volatility Field, be sure to hit the "Enter" key after you type the value. By hitting "Enter", the other field is computed. (i.e. if you enter the price, the implied volatility is calculated, and vice-versa)

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FIELDS AND DESCRIPTION:

  • Stock Price: The current Stock Price of the Security.
  • Strike Price: The strike Price of the option.
  • Dividend Yield: The dividend yield of the Security.
  • Interest Rate: The risk-free interest rate. Usually, treasury (risk-free) rates with same maturity as the option expiration. For short-term options, t-bill (or even libor) is fine.
  • # of Days: this really depends on how implied volatility is quoted. usually the convention (say, in bloomberg) is calendar days. as long as you're consistent in the convention for doing price-to-vol and vol-to-price, you're fine. but if one wants to use this tool for relative option valuation , business days is probably more relevant, since weekends contain no economic content.
  • Price: the option price. This field can be used to compute the implied volatility. REMEMBER TO PRESS 'ENTER' AFTER YOU TYPE THE VALUE. HITTING 'ENTER' STARTS THE CALCULATION. On the other hand, if you know the implied volatility, input the implied volatility field to get the Price.
  • Volatility: the implied volatility. If you know the implied volatility, you can input the value. REMEMBER TO PRESS 'ENTER' AFTER YOU TYPE THE VALUE. HITTING 'ENTER' STARTS THE CALCULATION. If you know the price, you can compute the implied volatility.