This is the first post of this blog and serves mainly a testing purpose. I would like to introduce you a very basic tool that helps to analyze European Call and Put Options. The tool calculates the price of an option with provided parameters. Obviously, there are a lot of tools available online these days with similar capabilities. However, my plan is to extend it, so that it can collect data regarding options that were traded in different markets worldwide and analyze those markets for various parameters (the parameters are not defined yet, so I will be a bit vague here :)). Considering, that there are a lot of services nowadays that provide programmatic access to financial data from all over the world (i.e. www.quandl.com and www.intrinio.com ), it becomes more and more convinient to write scripts that would analyze markets. So, I will try to use that fact to generate some interesting analysis.
I have implemented the tool as a Python application that uses Flask. It can be found at the following link: chimeranalytics.pythonanywhere.com . When the page loads you should see some basic form with the main parameters of an option, such as Spot Price (S), Strike Price (K), Start Date of the option, End Date of the Option, Intereest Rate (R), Volatility and a select list for Option Type. Those, who have experience with options should find all those parameters familiar, but let us still go through them to help you fill in the form properly.
Spot and Strike Prices are expressed in Dollars (or any other currency). So, for example, values 100 and 120 would considered correct for those fields. Start and End Dates are actual calendar dates and Start date should be before End Date. They should be inserted in “yyyy-MM-dd” format, so values 2018-03-30 and 2019-03-30 would be considered correct for Start Date and End Date respectively.
Next two parameters are the Interest Rate and Volatility. These two should be inserted as floating numbers between 0 and 1. So, 0.07 for Interest Rate and 0.2 for Volatility will be a correct input.
Finally, you need to select whether the analyzed option is of type Call or Put. Please remember that currently only European Call and Put options are considered in the scope of the tool.
If you fill in the form with exactly the same parameters as the ones I described, then the form should look like the screen below.
After you have filled the form in and would like to analyze the option, then just press “Calculate” button and wait for result. If everything was filled correctly, then you should get the following output:
As it can be implied from the screen, the app outputs the (theoretical) Value of the option and values of several Greeks. All the parameters are estimated within famous Black-Scholes model.
In addition to the estimated values, you can also see several charts with the value and Greeks. Those charts show how each of the parameters would change if the Start Date of the option got closer to the End Date but all other parameters were fixed.
Now, I absolutely realize that both design and analysis are really very basic, but as it has been mentioned in the beginning of the post I am planning to extend that tool and add more sophisticated analysis. In addition to that, currently the application is located at www.pythonanywhere.com, but that also might change in future. Obviously, I will keep you updated regarding the changes and new functionality.
Meanwhile, thank you for attention and hope the tool will work for you 🙂 .
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