Derivatives Calculator

How to Use the Derivatives Calculator

The Derivatives Calculator is a comprehensive tool designed to calculate the pricing and the “Greeks” of options based on the Black-Scholes model. This guide will walk you through the necessary steps to effectively use the calculator.

Step 1: Entering the Required Input Fields

• Underlying Asset Price: Enter the current price of the underlying asset. This value must be a positive number greater than 0.01.
• Strike Price: Enter the strike price for the option. Similar to the underlying asset price, this must also be a positive number greater than 0.01.
• Time to Maturity (Years): Enter the time remaining until the option’s expiration, in years. This value must be between 0.01 and 30, and can be specified with a precision of up to two decimal places.
• Volatility (%): Provide the expected volatility of the underlying asset as a percentage. The value must be between 0.01 and 200, with possible precision up to two decimal places.
• Risk-Free Rate (%): Input the annual risk-free interest rate, as a percentage. This rate should be between -10 and 100, expressed with a precision up to two decimal places.
• Option Type: Choose between a ‘Call Option’ or a ‘Put Option’ based on the type of option you wish to evaluate.

Step 2: Review Calculated Results

Once all the required input fields are provided, the calculator will use the Black-Scholes model to compute several important metrics:

• Option Price: This represents the market price of the option and is displayed in USD currency format with two decimal places.
• Delta: The Delta of the option, indicating the rate of change in the option price concerning the change in the price of the underlying asset, will be calculated with four decimal precision.
• Gamma: The Gamma value measures the rate of change of Delta concerning the price of the underlying asset, also presented with four decimal precision.
• Theta: The Theta represents the rate of change of the option price concerning the passage of time, measured with four decimals.
• Vega: This indicates the change in the option price relative to a 1% change in volatility, calculated with four decimal places.
• Rho: Rho measures the sensitivity of the option price to changes in the risk-free interest rate, expressed with four decimal places.

Conclusion

By carefully entering all input fields and examining the output results, you can gain valuable insights into the pricing structure and risk factors associated with your options. The calculator’s precision and comprehensive coverage of key metrics make it a valuable tool for traders and analysts alike.