Option Greeks calculator
An option Greeks calculator is a tool that helps traders and investors calculate the values of various Greeks for a specific options contract. Option Greeks are measures of the sensitivity of an option’s price to changes in certain variables, such as the underlying asset price, time to expiration, and implied volatility.
The most common Greeks that are calculated using an option Greeks calculator include:
- Delta – measures the sensitivity of the option’s price to changes in the price of the underlying asset.
- Gamma – measures the rate of change of the delta with respect to changes in the underlying asset price.
- Vega – measures the sensitivity of the option’s price to changes in implied volatility.
- Theta – measures the rate of decay of the option’s time value with respect to the passage of time.
- Rho – measures the sensitivity of the option’s price to changes in interest rates.
Volatility cone
The volatility cone is typically based on statistical models that use historical price data to estimate the future price range of the instrument. The cone can be used by investors and traders to better understand the potential risks and rewards associated with a particular investment. For example, if the volatility cone is relatively narrow, it may indicate that the price of the instrument is expected to remain relatively stable over time. Conversely, if the volatility cone is very wide, it may indicate that the price of the instrument is likely to fluctuate significantly over the same period of time.
The volatility cone is one of many tools used in technical analysis, a method of analyzing financial markets that focuses on using historical price data and other market data to predict future price movements. It is commonly used in the options trading market to evaluate the risks and potential profits of different options strategies.
Option strategy Greeks calculator
Option Strategy Greeks Calculator is the sum of Leg 1 to Leg 5 option contract Greeks that you input and calculate.
QTY (Quantity)= Quantity should be negative for sell position and positive for buy position. If position not taken should be zero value.
Interest rate annualized= Interest rate should be annualized and in decimal format if interest rate is 10% then take 0.1,
IV call and IV put= IV stands for implied volatility and should be taken in decimal format if IV for call or put is 15% then take 0.15,
Dividend yield in years= take in decimal format. If you want to know how to calculate read notes.
Time to expiry in years= Time to expiry is calculated in years format. If todays date is 20/04/2023 and expiry date is 27/04/2023. Then time to expiry is equal to (27/04/2023 – 20/04/2023)/365. If todays date and expiry date is same then take 8.5hours (0.3542day).
The option Greek for sell and buy positions will be charged in the same way as the option premium. For example, for sell position option premium is received and for buy position option premium is paid. Similarly, Option Greeks are also received for sell positions and paid for buy positions. So Associated option Greeks are written below-
Associated option Greek Delta= Delta received by sell position*sell quantity – Delta paid by buy position*buy quantity
Associated option Greek Gamma= Gamma received by sell position*sell quantity – Gamma paid by buy position*buy quantity
Associated option Greek Vega= Vega received by sell position*sell quantity – Vega paid by buy position*buy quantity
Associated option Greek Theta= absolute value of Theta received by sell position*sell quantity – absolute value of Theta paid by buy position*buy quantity
Note- The reason for taking the absolute value of theta is that the theta value which has a negative sign only indicates that the premium value will fall as time falls. Since we have already considered the formula, we will take the absolute of theta here.
Associated option Greek Rho= Rho received by sell position*sell quantity – Rho paid by buy position*buy quantity
Associated premium= net debit(NC)/net credit(NC)= premium of sell position*sell quantity – premium of buy position*buy quantity
If spot price (S) increases,
New associated premium (S+(unit change-1/-))= NC/ND + unit associated option Greek Delta
New associated Delta (S+(unit change-1/-))= old associated option Greek Delta + unit associated option Greek Gamma
If spot price (S) decreases,
New associated premium (S-(unit change-1/-))= NC/ND(old associated premium) – unit associated option Greek Delta
New associated Delta (S-(unit change-1/-))= old associated option Greek Delta – unit associated option Greek Gamma
If implied volatility (IV) increases and decreases,
New associated premium (IV+(unit change-1/100))= NC/ND(old associated premium) + unit associated option Greek Vega
New associated premium (IV-(unit change-1/100))= NC/ND(old associated premium) – unit associated option Greek Vega
If time to expiry (T) increases and decreases,
New associated premium (T+(unit change-1/365))= NC/ND(old associated premium) + unit associated option Greek Vega
New associated premium (T-(unit change-1/365))= NC/ND(old associated premium) – unit associated option Greek Vega
If annualized interest rate (R) increases and decreases,
New associated premium (R+(unit change-1/100))= NC/ND(old associated premium) + unit associated option Greek Rho
New associated premium (R-(unit change-1/100))= NC/ND(old associated premium) – unit associated option Greek Rho