How to use the Options/Warrants Calculator?
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1 How to use the Options/Warrants Calculator? 1. Introduction Options/Warrants Calculator is a tool for users to estimate the theoretical prices of options/warrants in various market conditions by inputting different parameters. The calculator can cater for stock options, index options, stock warrants, and index warrants. IMPORTANT NOTE Please note that this calculator is an educational tool intended to help individuals learn how options and warrants work. The actual market environment may not be the same as what the theoretical models assume. Users of this calculator should not make investment decisions based upon values generated by it only. 2. Overview The calculator can cater for stock options, index options, stock warrants, and index warrants. Users can click respective tab to calculate the price of the corresponding instrument. The tool consists of four sections: Users must complete data input section and press Calculate button in order to show the other three sections.
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3 3. Using the calculator The steps of evaluating stock/index options and warrants are very similar. Hence this document will focus on explaining the steps involved in evaluating stock options. 3.1 Stock Option tab Step 1 Click Stock Option tab. Step 2 Choose desired stock, contract expiry month and strike. Step 3 Press. Stock price, implied volatility, strike price, expiry etc will be filled into input fields automatically.* Step 4 *Users can fill in all input fields by themselves. After filled in the input fields, press. Results section, backward-compute implied volatility section, and price/volatility matrix section will be shown. Note on default data: 1. Implied volatility (IV) is calculated from last traded price of selected option series. If there is no trade of both call and put options during the day, IV from last trading day will be retrieved. 2. Interest Rate and Dividend information are provided by Reuters. Dividend information includes both actual and forecast values. 3. Exercise style of Stock Options listed on HKEx is American style. Binomial model is used to evaluate American style option.
4 Theoretical prices of both call and put options Option greeks (risk parameters) This section demonstrates the theoretical prices and option greeks (i.e. risk parameters) of both call and put options according to values in input section. Option greeks include delta, vega, theta, gamma, and rho. These greeks are widely used in understanding risks profile in option trading. For details of the meaning of each parameter, please click the icon and view the document. This section is for users who wish to backward calculate implied volatility from market prices of the selected options. Step 1 Click to expand the section. Step 2 Last traded prices of current trading date will be filled into the input boxes if available.* Step 3 *Users are free to modify or input the values. Press to calculate implied volatility from the options prices filled and other assumptions entered in the input section. Results are shown under the input boxes.
5 This section provides a summary for option price changes with different stock prices and volatility assumptions. Users are free to modify the volatility interval and price interval of the matrices. Users are free to modify the volatility interval and price interval of the matrices. The matrices help investors to estimate prices of their options invested under different volatility and stock prices.
6 3.2 Index Option Tab Step 1 Click Index Option tab. Step 2 Choose desired index, contract expiry month and strike. Step 3 Press. Index level, implied volatility, strike price, expiry etc will be filled into input fields automatically.* *Users can fill in all input fields by themselves. Note on default data: Step 4 After filled in the input fields, press. Results section, backward-compute implied volatility section, and price/volatility matrix section will be shown. 1. Implied volatility (IV) is calculated from last traded price of selected option series. If there is no trade of both call and put options during the day, IV from last trading day will be retrieved. 2. Interest Rate Information is provided by Reuters. 3. Exercise style of Index Options listed on HKEx is European style. Black Scholes Model is used to evaluate European style index option. For please refer to instructions in Stock Option Tab.
7 3.3 Stock Warrant Tab and Index Warrant Tab Step 1 Users are required to fill in all input fields by themselves. Step 2 After filled in the input fields, press. Results section, backward-compute implied volatility section, and price/volatility matrix section will be shown. Note on warrants: 1. Stock Warrants can be differentiated into two types: Derivative Warrants and Company Warrants. Exercise styles of Derivative Warrants listed on HKEx are mainly European. Black Scholes Model is used to evaluate European Style Derivative Warrants. 2. Exercise styles of Company Warrants listed on HKEx are mainly American Style. Binomial Model is used to evaluate American Style Company Warrants 3. Exercise style of Index Warrants listed on HKEx is European style. Black Scholes Model is used to evaluate European style index warrants.
8 For please refer to instructions in Stock Option Tab.
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