How To Find Profit Making Nifty Trades Using A Nifty Option Calculator
Posted by Indrajit Mukherjee at June 13th, 2013
Nifty choice calculator and normal options pricing was once revolutionized in 1973 with the newsletter of the Black-Scholes Edition, the Nobel-prize successful equation which nearly created the selections market. However sooner than you learn the submit take 2 minutes of your time to take a look at our 2 killing trading programs: Trend Blaster and Super Scalper.
While looking at this formulation completely written out could be, for most individuals, absolutely confounding, a comprehension of choices pricing is properly throughout the realm of understanding of anybody with simple arithmetic abilities and information of their auto insurance policy.
Black-Scholes tells us that options on shares could be priced utilizing almost the exact same inputs that your insurance coverage agent uses to quote your auto coverage premium. Each rely totally on (a) the value of the asset (the worth of the car or the inventory) and (b) the risk (your driving report or the stock’s common value adjustments).
Examine for one second, Driver A and Driver B.
Driver A is a 17 years male high school senior with two rushing tickets since he got his license, and whose parents have purchased him a Ferrari with a bumper sticker that reads, “I can’t drive 55!”
Driver B is a 35-yr previous female homemaker with no traffic tickets within the last ten years who drives a Ford Taurus.
Clearly, who is going to have the upper threat and, henceforth, the upper insurance coverage premium? The insurance coverage agent might even take to following Driver A around simply to cowl himself.
Now, make that very same comparability to someone trying to price an choice on a $20 paper company inventory versus a $200 dot.com stock… you see the tactic here.
NOTE: The bigger the deductible, the lower the premium, and vice versa. The insurance coverage deductible might be in comparison with the choice strike price.
Let’s analyze the completely different parts which are used to determine the theoretical worth of an choice:
The worth of the underlying inventory
The strike worth of the choice
The time until the choice expires
The price of money (interest rates less
dividends, if any)
The volatility of the underlying stock
If we take all these components and plug them into the Black-Scholes components, the model will calculate an choice’s theoretical value. Let’s do that now. Think about we need to value a Name and a Put on a Inventory XYZ, and that XYZ presently is at $50 a share. Think about additional that we wish to value the 30-Day 50-strike Call and Put, and that rates of interest proper now are around 4%. Think about, as effectively, that XYZ Inventory pays no dividends, and that its historical volatility is approximately 16%. If you need to overview the historical volatility of a particular inventory, please go to www.nseindia.com and search for it.
We are sharing a nice mini Nifty option calculator to calculate values of Nifty options. Apart from Nifty you may use it for calculating option values of any FNO stocks using this Nifty option calculator. How to use guide is also available with the Nifty option calculator.
You can freely download and use the Nifty option calculator by clicking the button below.
Suggested reading: The Bible of Options Strategies: The Definitive Guide for Practical Trading Strategies. In case you just like the put up share it with the sector the usage of the social share icons under.