Documentation
Welcome to option trading!
Our website makes it easy for you to predict option prices based on expected movements of the underlying stock. Simply select the desired stock ticker and option strike, and our tool will provide you with accurate predictions.
Our prediction is based on the latest and most accurate methods that we have developed. However, it is important to note that markets can be unpredictable and unforeseen events can impact prices. Therefore, this prediction should be considered a guide, but it is important to trade with caution and at your own risk.
How to use the website to calculate option prices ?
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Key terms and definitions
| Variable | Description |
|---|---|
| Strike | The stock price at which the option can be exercised for profit |
| Percent Move | How much of a percentage move from current underlying is the strike |
| Price Bid/Ask | The prices at which there are open orders for the option |
| Price Real | The most likely price at which the option can be bought or sold, based on the average of the bid/ask prices and the last transaction price for the option. |
| Extrinsic price | The value of the option minus the price of the underlying stock when the option is in the money {ITM} |
| Bid/Ask extrinsic | The extrinsic prices at which there are open orders for the option |
| ROI | The return on investment of the option, based on the price of the underlying stock if you are buying the option, or the strike price if you are selling the option {for example, in the case of covered calls or selling puts} |
| Yearly APY | The non-compounded annual rate of return based on the ROI, the APY is using the 16:00 closing time of the market to evaluate the annual rate. If you are using 0 days option or day trading this number could be different from your actual returns. |
| Ask/Bid Yearly APY | The non-compounded annual rate of return based on the ROI using the bid or ask prices |
| Volatility | The implied volatility of the option, calculated using the Black-Scholes formula |
| BreakEven | The price the underlying stock needs to reach to break even, given the option price and using the real price |
| σ-2σ-3σ | σ {Sigma} to 3 σ {sigma} represent the expected range of price of the underlying based on it's variance. It is equivalent to the probability {84.1%, 97.7%, 99.8%} of the underlying stock to remain below this number {for a call option} or above this number {for a put option}. This can also be interpreted as the market's expected price movement during this time period. |
| Proba of ITM | The probability for the option for ending ITM by expiry. This is calculated based on the IV of the strike option. |
| Daily Expected Move | The daily expected move of the underlying stock to reach the strike price by expiration |
| Grey Color | Grey represent in the money |
| Yellow Color | Yellow represent current price |
| White Color | White is out of the money option |
How are calculated the option price predictions ?
The website uses the Black-Scholes formula to estimate option prices at each requested date and requested prices range. The most variable factor determining option prices is the implied volatility. We are using multiple advanced techniques to estimate how the volatility of the option will change when the underlying price is changing. These include taking into account volatility smile for recalibration, time recalibration and historical implied volatility for smoothing earning results,
I noticed that the volatility of the option at same time and price than original is showing a different in the prediction table ?
There may be instances where the predicted volatility of an option deviates from the actual volatility observed in the market. Due to the dynamic and potentially unpredictable nature of market, we have implemented a feature that recalculates the volatility by incorporating data from neighboring strike prices. This approach enables a more accurate and reliable prediction of volatility, ultimately providing a valuable tool for informed trading decisions.
Where are prices information coming from ?
Stock and prices are being retrieved from trusted 3rd party. Unfortunately prices are delayed by 15-30minutes, but we will be working on finding better source of data in the future.
I want to do more complec strategies, can I predict prices for multiple options at the same time ?
You will be able to do it soon, this is being worked on.
Limitations:
- Price data may be delayed by 15-30 minutes
- Real price tries to be estimate the real value of the option, but slippage due to spread between bid/ask can occur depending on market conditions
- Option prices may not be representative of true market conditions during market close, causing predicted implied volatility to be less reliable.
- Brokerage fees are not taken into account
- Taking Dividends into account is not supported yet
- There is a limit to the number of free requests
- This has been tested on US stock market. Our current data provider doesn't support options for many other markets'