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Price: $... | FIGI: ...
Expiration date
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The expiration date is when an option contract expires. An option contract is a contract to buy (call) or sell (put) an asset at a specific price (strike price) until a specific date (expiration date). This contract has a certain value, which is determined by the market and depends mainly on the strike price, the current stock price, and the time until expiration. At the expiration date, the option contract is worth its intrinsic value, which is the difference between the strike price and the stock price as an option is the right to buy/sell the stock at the strike price. For (call/put) options, the expiration date is the last date you can exercise your right to (buy/sell) the stock at the strike price. Select a date you want to assume a probability distribution for and calculate the optimal option strategy.
Market Data Overview
iThis chart gives an overview of the market data for the selected stock and selected expiration date. The white lines show the performance of the available options. The blue line shows the implied market probability distribution of the stock price at the selected expiration date calculated by a method described in the financial paper from Breeden and Litzenberger (1978).
Probability Distribution
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Make an assumption about the probability distribution of the stock price at the selected date. The X-axis shows the possible stock prices the stock can assume at the selected expiration date,
the Y-axis represents the probability density for each stock price. The area under the curve represents probability. Drag points to adjust the distribution or add new points by left-clicking, remove points by right-clicking.
Risk Tolerance
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Define your risk tolerance profile by adjusting the curve. The X-axis represents probability scenarios
from worst case (0%) to best case (100%). The Y-axis shows your minimum acceptable performance for the scenario given by the X-axis.
Negative values indicate maximum acceptable losses, positive values show minimum required gains.
Drag points to adjust your risk tolerance curve.
Pre-set profiles:
Search Parameters
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Configure the parameters for the option strategy search. These settings determine how thoroughly
the algorithm will search for the optimal spread (combination of options) to maximize expected profit while meeting your risk tolerance.
Number of steps:
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The number of evenly spaced points to evaluate. More points provide better accuracy
but increase calculation time.
Custom weights:
Estimated calculation time: -
ETA: -
Cost: -
Investments to compare: -
Calculating optimal strategy...
ETA: -- seconds
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Expand Console
Found Option Strategy
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This shows the optimal option strategy found by the algorithm. Each line represents one leg of the strategy, showing the weight (percentage allocation), option type (call/put), strike price, and the price to pay for that option.
Strategy Performance Analysis
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This chart displays the potential profit/loss of the calculated options strategy. For any stock price on the X-axis, the chart shows the profit/loss performance by the selected expiration date of the strategy in percent on the Y-axis. These values are without uncertainty.
The only uncertainty is which stock price will be reached by the selected expiration date.
Black-Scholes Valuation
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The Black-Scholes valuation is a PDE (Partial Differential Equation)-based, nobel-prize winning method to predict the price of the option before its expiration date. Each cell represents the performance of the strategy for a specific share price (rows) on a specific time before expiration (columns). This is a theoretical performance and the actual performance may vary. The last column shows the performance of the strategy at expiration date and is the same as the above performance chart (rotated 90 degrees clockwise) and without uncertainty. The Black-Scholes valuation has flaws by the nature of idealized assumptions the real market does not follow but it is a good and widely used starting point for option pricing.
Risk Profile Comparison
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This chart compares your specified risk tolerance (red) with the actual risk profile achieved by the found strategy (blue).
If you have set to include the Risk Tolerance in the Search Parameters, the achieved profile should always be above your
minimum requirements as that represents your risk tolerance being met. The green line shows the Iterative Risk Profile: a simulation of 10,000 successively and iterative investments into the found strategy. In each simulation the found investment is iteratively and successively invested in 20 times and the end result is stored. The 10,000 simulations are sorted from best to worst and displayed here.
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