Copyright 2004 Optinet Inc.
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15% drop
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15% rise
TheValue of Call Option
The Black-Scholes Formula calculates the current value of a Call Option. A call Option of a stock is the right to buy the stock at the Excercise Price before the time of maturity. The major assumptions of this formula is that the interest rates and the stock volatility are constant during the life of the option.
Stock Price Today ($)
Stock Strike Price ($)
Interst Rate Today (%)
Time to Maturity of Call ( wks )
Fluctuation of Stock Return (%)
Call Option Value Today
Call Option price Today ($)
Today's Date
Stock Name
Optinet's Recommandations
INPUT
When you buy a call option you agree to pay the strike price to the seller. You do it when you bet that the stock price will go up as shown in curve B. Therefore in Case B you will gain ( P ) minus option price ( p ) minus ( c ). In A you will only loose the option price ( p ) plus commission
If you sell a call, then in case B, where the stock price goes up, you will gain the difference between strike price and stock price ( G ) plus the option price (p ) minus commission ( c ). In case A, where the stock price drops, you will loose the drop in stock price ( L ) in case you sell the stock, plus commission ( c ) and you will gain the option price. You sell a call when you feel high probability that the stock price may come down, as shown by curve A and you like to hedge against losses.
A call is an Option to buy a stock at maturity date at a strike price. Calls are traded on the markets and can be sold for hedging against losses in case A, or leverage buying high volumes with little cash in case B.
This tool calculates the value of a call option today. The value can be used for short term decision to buy or sell the call prior to maturity. It can also be used to optimize the expected gain for long term investment.
Commission ($)
Estimated Stock Change Probability ( sum = 1 )
30% rise
YOUR OBJECTIVES
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Short Term
Long term
REFERENCE
RETURN
SCHWAB
FIEDELITY
MERRILL LYNCH