Options and Volatility Tutorials
This page explains the Black-Scholes formulas for d1, d2, call option price, put option price, and formulas for the most common option Greeks (delta, gamma, theta, vega, and rho). Black-Scholes Formula Parameters According to the Black-Scholes option pricing model (its Merton’s extension that accounts for dividends), there are six parameters [more…]
This page explains the differences between types of volatility – implied, realized, historical. There are other types and terms which we will also explain, including forecast volatility, future volatility, and statistical volatility. How They Differ Volatility, typically expressed as a percentage and interpreted as standard deviation of returns, measures how [more…]
Greeks are statistics which measure sensitivity of option prices to various factors, such as underlying price (delta, gamma), time to expiration (theta), volatility (vega), and interest rate (rho). They help a trader understand risk exposures of option positions: for example, when an option portfolio has positive delta, its value will [more…]
The objective of this page is to explain the logic of VIX calculation and some of the underlying assumptions and parameters. Exact formulas are available in a short pdf named VIX White Paper on the official website of CBOE. If you are not familiar with VIX, you may first want to [more…]
This page is a guide to creating your own option pricing Excel spreadsheet, in line with the Black-Scholes model (extended for dividends by Merton). Here you can get a ready-made Black-Scholes Excel calculator with charts and additional features such as parameter calculations and simulations. Black-Scholes in Excel: The Big Picture [more…]
Black-Scholes Greeks Excel Formulas This is the second part of the Black-Scholes Excel guide covering Excel calculations of option Greeks (delta, gamma, theta, vega, and rho) under the Black-Scholes model. I will continue in the example from the first part to demonstrate the exact Excel formulas. See the first part [more…]
This page is an overview of main events and papers related to the Black-Scholes option pricing model. Besides works of its main authors, Black, Scholes, and Merton, we will also investigate earlier ideas which influenced the model, and other researchers (many of them famous for other models) who played a [more…]
This is a detailed guide to calculating Average True Range (ATR) in Excel. We will first calculate true range and then ATR as moving average of true range. We will do all the three popular ATR calculation methods – simple, exponential, and the original Wilder’s smoothing method. You don’t need [more…]
Contents Calculating Call and Put Option Payoff in Excel Merging Call and Put Payoff Calculations Short Option Payoff and Position Size Option Strategy Payoff and Multiple Legs Drawing Option Payoff Diagrams in Excel Calculating Option Strategy Maximum Profit and Loss Calculating Option Strategy Risk-Reward Ratio Calculating Option Strategy Break-Even Points [more…]
This page is a detailed guide to calculating historical volatility in Excel. Things Needed for Calculating HV in Excel Historical data (daily closing prices of your stock or index) – there are many places on the internet where you can get it for free, including Yahoo Finance or Google Finance [more…]
This page is a detailed guide to finding and downloading historical data such as daily stock prices or index values from Yahoo Finance. Go to Yahoo Finance homepage: finance.yahoo.com At the moment and on my computer it looks like this. It may look a little different on your device, but [more…]
This is the user manual for the Binomial Option Pricing Calculator.
On this page you can find essential information to get started.
For more details and examples, follow the links to individual sections.