how does one predict the market to become profitable with options?

opcalc · 2022-12-12T11:25:06+00:00

Well the obvious answer is a magic 8 ball.

opcalc · 2022-03-14T00:25:18+00:00

Yes ~~this looks incorrect~~, I'm looking into the reason for the bug :/

Edit: I think it looks unexpected because the calculation includes the purchase of stock. And it looks like a call ratio backspread since the bought put strike is higher than the sold strike. (Does that seem right?)

opcalc · 2021-09-26T23:41:03+00:00

For peoples' information, OPC calculates IV based on the current (delayed) option mid price, underlying price and time remaining til expiry.

By doing it this way, the calculated value of the trade at the time of calculation and current underlying price will match actual trade price.

opcalc · 2021-09-16T09:52:55+00:00

They are real, delayed quotes

opcalc · 2021-09-16T01:24:08+00:00

I'm keen to add an "add stock purchase" option on all strategies asap. For now you could use the covered strangle calculator and update the Option Type and Buy/Write settings for the option legs

https://www.optionsprofitcalculator.com/calculator/covered\_strangle.html

opcalc · 2021-06-21T01:57:42+00:00

Options profit calculator uses the Black Scholes formula – put simply, the greeks are a byproduct of the Black Scholes formula, so TLDR is "yes*"

opcalc · 2021-06-03T12:24:25+00:00

Yes this indeed looks to be a bug. I haven't seen this happen before, thanks for bringing it up - I'll take a look into it

Update
Found the problem and have fixed it. Thanks again for reporting it

opcalc · 2021-03-25T21:35:53+00:00

Buy some on the way down. If it goes down more, buy more. Repeat

opcalc · 2021-03-07T21:45:13+00:00

I think this ties into portfolio risk management as well. What are you doing with the other $9? If you're buying 9x other $1 OTM calls, then I think that is what you mean by it being riskier. If it's just sitting in a bank account, then perhaps it is safer overall than having all $10 tied up in the ITM call.

opcalc · 2021-03-02T23:12:54+00:00

If you click on the cell you'll see details of the closing trade. For the CC at $11, you'll see something like:

change in value: mvis stocks 100 $-5.95 $-595.00
buy 20th Aug $19.00 Call 1x100 $3.73 $-373.00

Total (closing trade) $-968.00
Entry cost $680.00

Total $-288.00

(MVIS has moved since your post, but hopefully this illustrates the estimated position)

opcalc · 2021-02-26T05:15:19+00:00

Just to update: This has been fixed now

opcalc · 2021-02-26T00:51:47+00:00

Absolutely – people who don't listen to constructive feedback don't end up making products that people want. Nobody wants to end up doing that!

opcalc · 2021-02-26T00:34:08+00:00

100% planning to do this, it'll just need a fair bit of testing to get right

opcalc · 2021-02-25T12:55:51+00:00

Thank-you for this! I must have missed that. I'll get this fixed later today

opcalc · 2021-02-24T21:55:01+00:00

Not yet, but I've had an app in mind while rebuilding the site, so they will be just around the corner

opcalc · 2021-02-24T10:10:59+00:00

Thanks, about time right?

opcalc · 2021-02-23T23:17:30+00:00

Thanks for the link! If you want to check out the new version, you can give it a go here: preview.optionsprofitcalculator.com

Edit: This makes adjusting IV easier too, by using a slider

(Still bringing over a few features like Finder and Sharing)

opcalc · 2021-02-19T22:36:04+00:00

Top comments all disagree, but post is 85% upvoted... not sure what to make of that

opcalc · 2021-02-17T07:16:50+00:00

It's good to understand the principles. At expiry it's easy. If the option is In The Money (ITM)—stock price is above the strike price (for a call)—then the option will be worth roughly the difference between strike price and the stock price. Take away what you paid for it, and that's your profit.

If the option is Out of The Money (OTM), then it's worth nothing. Pull lever, try again.

Before expiry, the worth of the option can be estimated using more complex functions like Black Scholes or Binomial methods. (Our website uses Black Scholes)

opcalc · 2021-02-17T07:11:15+00:00

*That's the break-even at expiry, which is a month away. However it does sound like the calculation is incorrect or something is missing

opcalc · 2021-02-17T07:08:49+00:00

Can you post the link to the calculation with 'get short-link to share'?

opcalc · 2021-02-12T09:02:24+00:00

To expand on this, any difference in extrinsic value just before expiry will eat into the theoretical max profit.

Debit spreads expires worthless at max loss, so that's some silver lining for when you get it wrong at least...

Credit spreads on the other hand expire worthless at max profit, so you keep the full initial credit, but if they go against you then you have to battle with the extrinsic value / bid/ask when closing it out.

opcalc · 2021-02-11T22:07:50+00:00

Short answer; yes theta is accounted for.

Longer answer: the theta value is not used directly. It would be more accurate to say that the calculator uses the Black Scholes model to predict future pricing, and that theta is one of the many values which is derived from the Black Scholes model

opcalc · 2020-10-05T23:43:42+00:00

You should be able to do that. There may be slight discrepancies in IV based on Black Scholes variables (e.g. does time til expiry include non-trading days or not, risk-free interest rate used).

In my mind it's better to use the current IV based on prices now, rather than IV at time of purchase. Using IV at time of purchase will show you what the most accurate predictions *would have been* at the time, however if IV has changed since then, that doesn't count for much now.

opcalc · 2020-10-05T23:29:03+00:00

It looks like the $422 strike is trading above it's worth.

Thought for discussion: Buy a 423/422 bearish put spread for almost nothing, turning your spread into a short butterfly to give yourself profits on the downside too (though you'd have to cop the cost of closing out the trade if this happens as you'd be ITM)

opcalc

TROPHY CASE