Option Analytics

Options Analytics gives investors the ability to:

• Compare current option prices and implied volatility to historical volatility.
• Perform instant analysis by simulating changes in a variety of factors - for example, stock price.
• Evaluate the potential profit/loss of real or hypothetical positions.

Montage screen

The montage screen is set as the default screen. This screen displays both the stock price as well as option prices for all strikes. In addition, theoretical values, implied and historical volatilities are displayed. The historical volatilities can be adjusted to match other volatilities that you choose. You can also see how the change in volatility affects the theoretical value.

The volatility portion of the screen displays a moving average of historical implied volatilities of the money options. This can be compared to the implied volatility to gauge whether an option is over or undervalued versus its historical prices. The implied volatility is the actual volatility based on the current option price as calculated by the Black-Scholes formula. Generally, if the implied volatility is higher than the historical volatility, then the option is considered overvalued relative to the typical stock price. Often, overvalued options are expected to decline in price as the implied volatility comes in line with the historical volatility. This situation would be reversed when the implied volatility is lower than the historical volatility.

Also, the montage allows users to create hypothetical positions with both stocks and options for analysis.

Position screen

This screen allows users to analyze real or hypothetical positions. This screen includes a graph for simulations, greeks, and variables to simulate changes in the market and their affects on option positions.

Greeks

The Greeks are mathematical calculations used to determine the effect of various factors on options.

Delta - A measure of the change in the price of an option relative to the change in the price of the underlying stock. For a call option, a delta of 0.50 means a half point rise in the option price for every dollar that the stock goes up. For a put option, a delta of 0.50 means a half point rise in the option price for every dollar that the stock goes down.

Gamma - The change in delta for every point change in the underlying stock.

Vega - The rate of change in an option's value relative to a 1% change in the volatility.

Theta (time decay) - The rate of change in an options value as time passes. A portion of every options value will be time value. Time value is that portion of an options price that represents the amount of time until expiration. An option's time value will be greater for those options with a longer amount of time until expiration as there is a greater likelihood that they will increase in value. This time value gradually decreases (decays) as the expiration day nears. An option's price decay tends to accelerate in the 30 days before expiration.

Simulations

The simulations function can be found at the top of the positions screen and provides the ability to perform instant profit/loss analysis by simulating changes in a variety of factors. You can chart the effects of changes in the price, date, volatility, and the interest rate on potential profits or losses in real or hypothetical positions. Users can also chart how a position's Greeks change.