VS - options fair value
fair value is the model value (Black&Scholes)
premium is what you actually pay or receive
Difference between model price and premium will characterize an option as cheap or overvalued.
Basically, the premium consists of:
intrinsic value (difference between the strike and the equity price, if in the money) plus a "rsik premium".
On the CBOE calculator, all the white boxes on the left are the variables cboe.com
all the values on the right (greyed) are the derived greeks.
As annual interest rate, I use the 13-weeks treasury bill(IRX, or $IRX, or IRX.X), seems to work fine in most fair value formulas.
Volatility: either use historical or IV from a greeks site as optionetics, or, better, analyse the historical volatility (as you would do your TA for the VIX) and put your own estimation there. You would have your own model price and be first on a bargain or first to drop a dog.
Other online applets give a probability to close ATM, but lost the links. Unfortunately. This strike probability is very accurate for checking your estimated target on an equity.
Geez... couldn't sleep, but did not intended to put my brain cell at work.
Was checkig Tokyo open: flat, no lower than yesterday's close,
Naz futures, flat.
May go to sleep now. |
