my options picks intraday/delivery

[option fan]

I am booking my all CALL OPTIONs fully except suzlon

 

[DanPickUp]

http://www.optiontradingtips.com/pricing/free-spreadsheet.html

Here you can find an excel sheet. We can workout option strategies. It gives us information on option greeks. I don't know much about option. Since you are an option trader you would know/understand a lot better than me when you get that workbook.

Hi

I had a look at your link. Here is the direct link to the calculation, as the download sheet is to complicated for non option traders.

http://www.option-price.com/index.php

You see four sheets : Option calculator / Custom Portfolio / Implied Volatility and Option combination.

To know, what is the right value of an option, you have to use the option calculator.

How to use ?

I will make a small introduction for those, which do not know it.

Underlying price : Here you put in actual price of the nifty like

Exercise price : Here you put in the strike price of the option you want to trade

Days until expiration : How many days are left, until your options expires ( or how many days you plan to keep this option. You then got an idea about, what the value tomorrow should be or how much you loose over the weekend with your option )

Interest rate : What are the official rates of the government bonds.

Dividend yield : Only useful, when you trade options on shares, as is the company's annual dividend payments divided by its market cap.

Volatility : Very, very important !! If the volatility in the market is high, the pricing of the option is very different compare to if the volatility is low.

Rounding : No use, at least for me.

Now let us make an example : Nifty is at 6260 / You want to buy a 6300 call /
this calls expires at the 20 of Nov ( as example ) / Government bond pays 5.25 % / Volatility in the market is around 35 %

Underlying : 6260 ( Nifty price at the moment )
Exercise price : 6300 ( 6300 call )
Days until expiration : 16 ( 20 - 4 = 16 )
Interest rate : 5 ( Government bond yields )
Dividend yield : 0
Volatility : 35 ( You must know, what volatility is in the market !! )
Rounding : 0

Now press Calculate.

You will see now on the right side : Theoretical price Call / Put

The call has a value of 171 and the put has a value of 197

Also watch the theta. That is what you lose per day.

Take care

DanPickUp

 

[rrmhatre72]

Hi

I had a look at your link. Here is the direct link to the calculation, as the download sheet is to complicated for non option traders.

http://www.option-price.com/index.php

You see four sheets : Option calculator / Custom Portfolio / Implied Volatility and Option combination.

To know, what is the right value of an option, you have to use the option calculator.

How to use ?

I will make a small introduction for those, which do not know it.

Underlying price : Here you put in actual price of the nifty like

Exercise price : Here you put in the strike price of the option you want to trade

Days until expiration : How many days are left, until your options expires ( or how many days you plan to keep this option. You then got an idea about, what the value tomorrow should be or how much you loose over the weekend with your option )

Interest rate : What are the official rates of the government bonds.

Dividend yield : Only useful, when you trade options on shares, as is the company's annual dividend payments divided by its market cap.

Volatility : Very, very important !! If the volatility in the market is high, the pricing of the option is very different compare to if the volatility is low.

Rounding : No use, at least for me.

Now let us make an example : Nifty is at 6260 / You want to buy a 6300 call /
this calls expires at the 20 of Nov ( as example ) / Government bond pays 5.25 % / Volatility in the market is around 35 %

Underlying : 6260 ( Nifty price at the moment )
Exercise price : 6300 ( 6300 call )
Days until expiration : 16 ( 20 - 4 = 16 )
Interest rate : 5 ( Government bond yields )
Dividend yield : 0
Volatility : 35 ( You must know, what volatility is in the market !! )
Rounding : 0

Now press Calculate.

You will see now on the right side : Theoretical price Call / Put

The call has a value of 171 and the put has a value of 197

Also watch the theta. That is what you lose per day.

Take care

DanPickUp

Hi Dan,

market price of 6300CE is just 100.
Why is it lower than theoretical value?

 

[nac]

^
Thanks a lot Dan...

 

[subratdas]

pls let me know how to get the volatility value?

Thanx

 

[DanPickUp]

Hi Dan,

market price of 6300CE is just 100.
Why is it lower than theoretical value?

Hi rrmhatre

The above was an example. Hope you are clear about that. There are two components which have to be 100 % right when it comes to pricing.

A : What is the volatility in the market ?

B : When do you have option expiration ?

The above option pricing spreadsheet will allow you to price European call and put options. The sheet is build on the Black and Scholes formula.

Put in the sheet the right data for A and B and have a look at the new price.

If this price is still very much different to the actual price in the market, then you should call your broker and ask him for the reason. Explain him your calculation and he then can explain his one.

Take care

DanPickUp

Edit : I tested it on my calculator which is for European and American style options and the results have been the same. It is A and B which is the key to such differences and the broker, which may wants to cheat you.

 

[option fan]

Hi

I had a look at your link. Here is the direct link to the calculation, as the download sheet is to complicated for non option traders.

http://www.option-price.com/index.php

You see four sheets : Option calculator / Custom Portfolio / Implied Volatility and Option combination.

To know, what is the right value of an option, you have to use the option calculator.

How to use ?

I will make a small introduction for those, which do not know it.

Underlying price : Here you put in actual price of the nifty like

Exercise price : Here you put in the strike price of the option you want to trade

Days until expiration : How many days are left, until your options expires ( or how many days you plan to keep this option. You then got an idea about, what the value tomorrow should be or how much you loose over the weekend with your option )

Interest rate : What are the official rates of the government bonds.

Dividend yield : Only useful, when you trade options on shares, as is the company's annual dividend payments divided by its market cap.

Volatility : Very, very important !! If the volatility in the market is high, the pricing of the option is very different compare to if the volatility is low.

Rounding : No use, at least for me.

Now let us make an example : Nifty is at 6260 / You want to buy a 6300 call /
this calls expires at the 20 of Nov ( as example ) / Government bond pays 5.25 % / Volatility in the market is around 35 %

Underlying : 6260 ( Nifty price at the moment )
Exercise price : 6300 ( 6300 call )
Days until expiration : 16 ( 20 - 4 = 16 )
Interest rate : 5 ( Government bond yields )
Dividend yield : 0
Volatility : 35 ( You must know, what volatility is in the market !! )
Rounding : 0

Now press Calculate.

You will see now on the right side : Theoretical price Call / Put

The call has a value of 171 and the put has a value of 197

Also watch the theta. That is what you lose per day.

Take care

DanPickUp

MASTERO is here..!!
Thanks DAN for your guidance..
i am reading and learning through your thread.. when my knowledge will be upto level will ask some queries..

thanks for your post once again !

 

[option fan]

Booked...fully

SBIN 3300 CA @ 180.... 48 to 180
BHEL 2500 CA @78...... 55 to 78
NIFTY 6300 CE @ 98.... 58 to 98
NIFTY 6200 CE @ 158.... 60 to 158
TATASTEEL 620 CA @ 24...... 23.30 to 24 more room is there
RELIANCE 1100 CA @ 34... 27.3 to 34 more room is there

holding suzlon 60 CA .. bought @ 2.2 & 1.5 cmp 1.75 ( yet in loss and expect too much from it..... and now those are not from pocket money!!)

Reason...... HAPPY DIWALI.. !! Long Week end !! NIFTY done 6300 !! had good enough profit !!

searching new trades... probably short side

 

[MindlessTrader]

NIFTY 6300 CE cmp is 107( theoritical value is 116 , if you count days from today)....but if days calculated are based on monday 8th nov...due to long weekend ....so its rightly priced..

 

[hawaisanjay]

Hi Danpickup ,I have few questions to you.
1) One should buy option if therotical value is less than actual price.Is it ok?
2) what about implied volatility? Is it that IV should be less than Historical volatility?
3) Have you used Option Oracle software?