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Option Trading Work Book 123
Option Trading Work Book 123
1
Introduction
This spreadsheet is provided free of charge for you to use to further your education in options trading.
The formulas used were taken from two great books on option trading
Option Volatility and Pricing by Sheldon Natenberg
Financial Models using Excel by Simon Benninga
You can read more about these books from the www.OptionTradingTips.com website
http://www.optiontradingtips.com
If you have any suggestions for this workbook or even have a bug to report, please feel free to email
me at admin@optiontradingtips.com
To stay up to date with changes to this workbook and other modifications to the website, please feel free
to subscribe:
http://www.optiontradingtips.com/subscribe.html
I have written all the formulas in Visual Basic using modules and are freely disclosed, so you may examine
the logic, edit and change the calculations as you like.
Troubleshooting
You will need to have Macros enabled for the calculations to work.
Follow the steps below to enable Macros:
Excel 97 - 2003
Go to Tools/Options
Click on the Security tab
Go to Macro Security
Change the setting to Medium
Close and reopen the workbook. It will ask you if you want to enable Macros, click Yes
Excel 2007
First, make sure that you can see the Developer tab
If there is no Developer tab, click on the Office icon to the top left of the application
and choose Excel Options, which is located at the bottom right of the popup.
Now click on Popular at the top left. Check the box titled "Show developer tab in the ribbon".
Release Updates
11/06/07 - Fixed a bug on the OptionStrategies tab. The greeks for Stock positions were previously displaying
27/04/06 - Fixed a bug that failed to calculate the theoretical change in P&L for stocks in the strategies tab.
28/08/06 - Fixed a small calculation bug for the Option Theta, which now has a near perfect accuracy.
1/10/06 - Added support for Dividend Yield, which can be used as a workaround to price options on futures
by making the Dividend Yield the same as the Interest Rate.
Basic
The worksheet labelled Basic is a simple option pricer.
You simply enter the option details into the yellow shaded areas and
the output values will be displayed underneath in the blue shaded cells.
OptionPage
OptionPage is a worksheet that allows you to price a string of calls and puts for the same expiration
date. Again, you enter the option details into the yellow cells and the output values are in the blue
shaded cells.
You can calculate the market implied volatility for each option by simply typing in the market price of
the option in the column labelled "Market Price" and the volatility implied by the option's market value
will show in the column "Implied Volatility".
Column's A and L are where you can change the strike prices used for the calculations. Or you can just
have the values derive straight from the Underlying Price by default.
OptionStrategies
This worksheet lets you enter combinations of options positions so you can view the payoff/risk graphs.
The underlying data for the options is taken from the information entered into the OptionPage worksheet.
Then just enter the number of contracts for each position and remember to put a negative number for sell
positions.
For Type, just enter "c" for call options, "p" for put options and "s" for stock/futures position.
If you know what the option is trading at, you can enter the market price in the "override premium"
row to calculate the P&L of the position after taking into account the actual price of the option.
StrategyGraphs
This worksheet will show the current Greek position values of your option strategy while referencing the
a range of underlying prices. You can change the range of values by changing the cell A17 in the OptionStrateg
worksheet.
ation in options trading.
nTradingTips.com website
n the ribbon".
tures position.
e "override premium"
e of the option.
Underlying Price 1000 The current base price of the instrument, eg, the closing price of Microsft Sto
Exercise Price 1000 The price at which the underlying instrument will be exchanged. Also called S
Today's Date 1/11/2022
Expiry Date 2/3/2022 The Date which the contract expires
Historical Volatility 20% The Historical Volatility of the asset's returns
Risk Free Rate 5.00% The current risk free interest rate i.e. your return on cash held in the bank
Dividened Yield 0.00% The Annualized Dividend Growth Rate of the Stock
DTE (Years) 0.06
Call Options
TheoretiMarket Implied Option Greeks
Strike Prices Price Price Volatility Delta Gamma Vega Theta Rho
22.50 ITM ### ### ### ### ### ### ###
23.00 ITM ### ### ### ### ### ### ###
23.50 ITM ### ### ### ### ### ### ###
24.00 ITM ### ### ### ### ### ### ###
24.50 ITM ### ### ### ### ### ### ###
25.00 ATM ### ### ### ### ### ### ###
25.50 OTM ### ### ### ### ### ### ###
26.00 OTM ### ### ### ### ### ### ###
26.50 OTM ### ### ### ### ### ### ###
27.00 OTM ### ### ### ### ### ### ###
27.50 OTM ### ### ### ### ### ### ###
rice multiple strikes for calls and puts for the same Expiry
e. Remember, you can customise your own workbook any way
Put Options
TheoretiMarket Implied Option Greeks
Strike Prices Price Price Volatility Delta Gamma Vega Theta Rho
22.50 OTM ### ### ### ### ### ### ###
23.00 OTM ### ### ### ### ### ### ###
23.50 OTM ### ### ### ### ### ### ###
24.00 OTM ### ### ### ### ### ### ###
24.50 OTM ### ### ### ### ### ### ###
25.00 ATM ### ### ### ### ### ### ###
25.50 ITM ### ### ### ### ### ### ###
26.00 ITM ### ### ### ### ### ### ###
26.50 ITM ### ### ### ### ### ### ###
27.00 ITM ### ### ### ### ### ### ###
27.50 ITM ### ### ### ### ### ### ###
Strat1 Strat2 Strat3 Strat4 Strat5 Strat6 Strat7
Contracts 1 -1
Type Stock Call
Strike 25 25
Calculated Premium #VALUE! #VALUE! 0.00 0.00 0.00 0.00 0.00
Override Premium
Premium Used #VALUE! #VALUE! 0.00 0.00 0.00 0.00 0.00
Delta 1.00 #VALUE! 0.00 0.00 0.00 0.00 0.00
Gamma 0.00 #VALUE! 0.00 0.00 0.00 0.00 0.00
Theta 0.00 #VALUE! 0.00 0.00 0.00 0.00 0.00
Vega 0.00 #VALUE! 0.00 0.00 0.00 0.00 0.00
Rho 0.00 #VALUE! 0.00 0.00 0.00 0.00 0.00
Graph Increment
1.00 Profit / Loss at Expiration
12.00
10.00
8.00
6.00
4.00
2.00
0.00
20 21 22 23 24 25 26 27 28 29 30
12.00 12.00
10.00 10.00
8.00 8.00
6.00 6.00
4.00 4.00
2.00 2.00
0.00 0.00
20 21 22 23 24 25 26 27 28 29 30 20 21 22 23 24 25 26 27 28 2
Gamma Theta
12.00 12.00
10.00 10.00
8.00 8.00
6.00 6.00
4.00 4.00
2.00 2.00
0.00 0.00
20 21 22 23 24 25 26 27 28 29 30 20 21 22 23 24 25 26 27 28 2
Vega Rho
12.00 12.00
10.00 10.00
8.00 8.00
6.00 6.00
4.00 4.00
2.00 2.00
0.00 0.00
20 21 22 23 24 25 26 27 28 29 30 20 21 22 23 24 25 26 27 28 2
elta
25 26 27 28 29 30
heta
25 26 27 28 29 30
Rho
25 26 27 28 29 30
IMPLIED VOLATILITY
Low Neutral
Buy Naked Puts Sell the
Bear Vertical Spreads: Underlying
Buy ATM Call/Sell ITM Call
Bearish
Buy ATM Put/Sell OTM Put
Sell OTM (ITM) Call (Put) Butterflies
Buy ITM (OTM) Call (Put) Time Spreads
M
A
R Backspreads Do Nothing
K Buy Straddles/Strangles
E Neutral
Sell ATM Call Or Put Butterflies
T
Buy ATM Call Or Put Time Spreads
D
I
Buy Naked Calls Buy the
R
E Bull Vertical Spreads Underlying
C Buy ATM Call/Sell OTM Call
T Bullish
Buy ATM Put/Sell ITM Put
I
O Sell ITM (OTM) Call (Put) Butterflies
N Buy OTM (ITM) Call (Put) Time Spreads
VOLATILITY
High
Sell Naked Calls
Bear Vertical Spreads:
Buy OTM Call/Sell ATM Call
Buy OTM (ITM) Call (Put) Time Spreads
Buy ITM (OTM) Call (Put) Butterflies
Sell OTM (ITM) Call (Put) Time Spreads
12
10
9
6 0
0
75 80 85 90 95 100 105 110 115 120 125
120 125
#VALUE! #VALUE!
#VALUE! #VALUE!
#VALUE! #VALUE!
100 Underlying Price
100 Exercise Price
11-Jan-22 Today's Date
25.00% Historical Volatility
12-Mar-22 Expiry Date
0% Risk Free Rate
0% Dividend Yield
60 DTE
0.16 DTE in Years
12
10
9
6 0
0
75 80 85 90 95 100 105 110 115 120 125
120 125
#VALUE! #VALUE!
#VALUE! #VALUE!
#VALUE! #VALUE!
100 Underlying Price
100 Exercise Price
11-Jan-22 Today's Date
25.00% Historical Volatility
12-Mar-22 Expiry Date
0% Risk Free Rate
0% Dividend Yield
60 DTE
0.16 DTE in Years
100 90 80 70 60 50 40 30 20
100 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!
100 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!
#VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!
12 12
10 10
8 8
6 6
4 4
2 2
0 0
100 90 80 70 60 50 40 30 20 10 1 100 90 80 70 60 50 40 30 20 10
DTE Theta Theo % Diff
100 #VALUE! #VALUE! #VALUE!
99 #VALUE! #VALUE! #VALUE! #VALUE!
98 #VALUE! #VALUE! #VALUE! #VALUE!
97 #VALUE! #VALUE! #VALUE! #VALUE!
96 #VALUE! #VALUE! #VALUE! #VALUE!
95 #VALUE! #VALUE! #VALUE! #VALUE!
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93 #VALUE! #VALUE! #VALUE! #VALUE!
10 1 92 #VALUE! #VALUE! #VALUE! #VALUE!
#VALUE! #VALUE! 91 #VALUE! #VALUE! #VALUE! #VALUE!
#VALUE! #VALUE! 90 #VALUE! #VALUE! #VALUE! #VALUE!
#VALUE! #VALUE! 89 #VALUE! #VALUE! #VALUE! #VALUE!
88 #VALUE! #VALUE! #VALUE! #VALUE!
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n Price 86 #VALUE! #VALUE! #VALUE! #VALUE!
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