Are there any easy free programs out there that will calculate a ballpark figure for options prices? I found one, but it requires me to enter things like "dividend rate" and "volatility" that I may not know. Is there a program that will allow me to enter current option prices (and stock prives of course) and the program will tell me what the option prices will be 2 weeks from now given different prices on the underlying stock?
The basic calculator on Ivolatility.com is pretty easy to use. Enter the ticker and it will fill in the dividends and such. You shouldn't really consider trying to price the option without the div and interest rates, it will be completely inaccurate.
the problem with any software would be that it could not take into consideration any intervention like fda, backdating of options, frauds, mergers etc. I would assume the algorithm would be based upon shares traded on average over month, wk, day with no news as any news will change the volatility and you would be hooked. an example is dndn recently, I wrote calls @ 20 and 25 dollars and received a good premium so I thought, the stock retraced over the next few days/wk from just over 25 to approx 12 dollars and my calls were in the negative. The premium in the calls and puts barely changed until the day of expiry. This is not uncommon. I believe the best you can do is write your calls and puts with the understanding you will be fed one of the positions. I/ we here try and establish the stocks present channel or range and then write and cover the option when possible. if and when the stock breaks long or short we accept the fact we are going to be fed, keep the premiums and look to write within the newly established channel. funds from the premiums are used to buy out of the money calls and puts to ensure one is totally hedged. if the software was available, it would not be free and more important if it could predict the future then one of the many financial institutions, hedge funds etc would outright buy it. remember a stocks current bid / ask, trend lines, supports and resistances etc are one's perception and only exist until the big boys allow it as we will never know the real agenda of a stock, only the institutions control that. good luck and happy hunting w
No. The volatility input is an educated guess. Given the price of an option, the math can be worked out to solve for volatility (called implied volatility), but you can't know with absolute certainty what the volatility should be a priori to put into the pricing model. The volatility on the underlying stock is the actual volatility, but is only a very rough correlation of what the implied volatility will turn out to be. There are data suppliers who keep historical actual volatility and historical implied volatility, but I don't names offhand. Volatility estimation is a big deal, and lots of quants gain meaningful employment trying to compute its value so that it can be used by market makers and hedge funds etc.
you can get historical vol from the cboe site. pricing engines are at quantlib.org and R's rmterics library. http://www.itp.phys.ethz.ch/econophysics/R/
cool links rosy2, this is more what the OP probly wants though. Its a nice simple to use package, well worth the money.