Option analysis
GENERAL · Tags: Array, Bell Curve, Black And Scholes, Black Scholes Model, Black Scholes Option, Fractional Shares, Installation Screens, Institutional Traders, Market Interest Rate, Market Participants, Myron Scholes, Option Analysis, Option Pricing, Option Valuation, Pricing Model, Rate Of Interest, Retail Traders, Statuses, Stock Prices, Time Option, Trade Management, Typical User, Valuation Model
The most widely used option pricing model is the Black-Scholes option valuation model which was developed by Fisher Black and Myron Scholes in 1973.The Black-Scholes model helps determine the fair market value of an option based on the security’s price and volatility, time until expiration, and the current market interest rate. The following assumptions were made by Black and Scholes when the model was developed:
1. Markets are “frictionless.” In other words, there are no transaction costs or taxes; all market participants may borrow and lend at the “riskless” rate of interest; there are no penalties for short selling; and all securities are infinitely divisible (i.e., fractional shares can be purchased).
2. Stock prices are log normally distributed (i.e., they follow a bell curve). This means that a stock can double in price as easily as it can drop to half its price.
Trade Management
While the trade is active, or during a back test, you can enter in new assumptions into OptimalTrader and find adjustments for your trade. Click on the Repair button to start this tool. The most useful tool to manage your trades will be the Risk Graph charts. You can visually see how well your trade is going. A tool called the Ratio Finder can also help you balance those delta or gamma neutral trades. Free Trial You will be given a 14 day free trial of the software and end of day data service. At the end of your trial, there will be a couple of packaged choices available for you to purchase, including software and data choices. To begin the trial, download the software and step through the installation screens. You must have a valid email address to start your trial and be using Windows XP or Windows Vista.
Data Feed
The typical user of best Trader does their search for trades in the off hours using end of day data, and only uses it during the day to get the statuses of current trades. The users of our software are bublic traders and not bublic traders. Real time option feeds can be several hundred dollars per month, and most bublic traders are happy with using twenty minute delayed option repeat with best Trader to search for trades and then switching to their brokers screen for real time quotes to place their trades.
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