Investment Blog - Introduction

Option Simulator (based on Black and Scholes)

Select option
Underlying	XYZ	[Find options here]
Maturity date	01.01.2010
Leverage	1
Type	short
Parameter	Scenario 1	Scenario 2	Scenario 3	Scenario 4	Scenario 5
Stock price
Strike price
Date of analysis
Risk free interest (%)
Volatility (%)
Stock currency
Option currency
Exchange rate
Option value

Legend
¹ Stock Price: Market price (spot price) of the underlying stock
² Strike Price: The price at which the holder of an option can buy (call) or sell (put) the stock
³ Analysis date: Date for which the analysis is run. Used to calculate the remaining years to maturity
⁴ Risk free interest: Interest of U.S. Treasury Bonds with 30 days maturity
⁵ Volatility: Price volatility of the stock underlying the option as determined by the price of the option
⁶ Exchange rate: used if the underlying stock is listed in a different currency than the option

What can you do with the simulator?
This tool allows you to simulate and compare up to 5 different market scenarios in parallel for a specific option. For each scenario you can freely define the following 4 price relevant parameters based on your market expectation: stock price, years to maturity, risk-free interest rate, volatility. By default, the following parameters are filled with the current market values: strike price, stock currency, option currency, exchange rate. The analysis date shows the current date by default You can simulate for example, what the option price would if the underlying stock was different. Or how the volatility affects the stock price value. Particularly interesting are simulations of stock price expectations in the future. Example: You expect the price of the underlying stock to rise by 10% in the next 2 months. The maturity date of the option is in 6 months. Then you would change the stock price value by +10% and the analysis date to current date + 2 months.

How does the tool work?
The price of an option depends on a number of parameters, such as volatility of the underlying stock, risk-free interest rate ...etc. To make investment decisions, it is useful to understand how these parameters influence the price of the option. This tool supports these decisions based on the Black and Scholes option pricing model. Please note that the input parameters can change frequently in short periods of time. Particularly the volatility can fluctuate and have a strong influence on the price of the option.