Options come under derivate security, basically an agreement between buyers or holders and sellers or writers of an underlying stock. All the traders who are dealing with options must be familiar with the term option calculator. In order to avoid the dilemma regarding analyzing options and formulating strategies the calculated has been invented. During the discussion of Nifty option calculator, we will go through the terms like Black Scholes Model, Options Greeks. In case of options trading, must remember one thing. A call is directly proportional to price while put is inversely proportional to price. Let’s start with the definition of options calculator first.
What is an Options Calculator?
Options calculator helps to analyze options by using the arithmetic calculating algorithm. There are varieties of options calculating process available in the market. Among them, Black Scholes, Binomial option, Monte Carlo etc are popular enough. Today, we will go through the Black Scholes Model. It has gained popularity because of its fast calculative methods and accurate result. Before going through the calculation process of the options calculator, have a look at the main segments of an options calculator, Black Scholes Model, and Options Greeks.
Black Scholes Model
- The Black Scholes is a well-known mathematical option pricing model, helps to calculate options greeks the delta, gamma, theta, vega, and rho of options. Behind the model, there are complex calculations but traders only need to put values for options calculation. Though today’s article is not about options greeks, still for basic understanding purpose let’s have some basic idea regarding what options greek is. You may go through our article on the model.
- Options greeks helps to measures the various factors which affect the price of an options contract. Key Greeks include Delta, Gamma, Theta, Vega, and Rho. Traders with enough knowledge of Greeks are more powerful in comparison to those who have less knowledge on that. If you want to know more about it, can check our article on it.
What are the components of Options Calculator?
You can find out hundreds of options calculator in different sites. According to my personal opinion, Zerodha options calculator is one of the best among them, named as Black and Scholes Option Pricing Formula. In order to do the analysis part, traders have to put certain data like Spot price, Strike price, Expiry date, Volatility, Interest percent, Dividend. Now, by giving the brief descriptions, we will introduce these terms with you.
- Spot price refers to the current market price of a certain underlying asset.
- At this price option holders can buy or sell the underlying security, also known as the exercised price.
- Before expiry of an option, the numbers of days left, comes under expiry date.
- Volatility Index or VIX is the reliable measure of market volatility.
- Risk-free prevailing rate (as per the RBI 91 day Treasury bill rate) in the economy needs to put there.
- You need to put the expected value of dividend per share in the stock.
How to use Nifty Option Calculator?
You need to open the NSE official website first. Then put your selected script name on the search option. After that select the stock option and write down your preferable call or put option along with strike price over there. Then click on the get data. You will get overall details of the particular script.
For example, I choose the Axis Bank script for an example. Current market price is 607 and I expect the price will go up at 610 before the expiry date of the option. After placing get data, details come.
There you get every expected detail of the selected script. spot price, interest rate, volatility, expiry date etc.
As I have mentioned that in Zerodha you can get a quite popular options calculator. I here put all the data of axis bank to get analytical details of the stock. A screenshot is given below:
Here as you can I put all the information, taken from NSE site. Only the interest rate is based on the Risk-free prevailing rate (as per the RBI 91 day Treasury bill rate) in the economy. As you can see, the NSE result and Zerodha calculator result is almost the same. Therefore, you can get an example of the accuracy of data in Zerodha.
Zerodha here provides a Options Calculator ( Black and Scholes Option Pricing Formula). The link of the same is given below. From there you get every detail of your selected options script.
I hope, you get a brief idea regarding Nifty Option Calculator and steps to use the Nifty Option Calculator too.
Indrajit is a professional blogger and trading system developer. Amibroker expert, WordPress expert, SEO expert and stock market analyst.Trading since 2002, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.
Categories: Trading Strategy