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<DIV><FONT size=2>
<DIV><FONT size=2>Open Excel, click Tools|Add-ins and apply the Analysis
ToolPak. </FONT></FONT><FONT size=2>The Delta etc. as Indicators
(Functions)</FONT></DIV>
<DIV><FONT size=2>come as an Add-In (eg most Add-ins will have the XLA or XLL
extension) </FONT><FONT size=2>with Excel, eg The Analysis
ToolPak,</FONT></DIV>
<DIV><FONT size=2>that can be found in the Office|Library folder or must be
</FONT><FONT size=2>installed from the Office97PRO -CdRom by
running</FONT></DIV>
<DIV><FONT size=2>the Office97PRO Set-up program.</FONT></DIV>
<DIV><FONT size=2> </DIV></FONT></DIV>
<DIV><FONT size=2>For another free and handy Option utility program, Option$ence
v1.0, go to</DIV></FONT>
<DIV><FONT size=2><A
href="http://www.geocities.com/WallStreet/Floor/1120/Optview.ZIP";>http://www.geocities.com/WallStreet/Floor/1120/Optview.ZIP</A></FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Ton Maas<BR><A
href="mailto:ms-irb@xxxxxx";>ms-irb@xxxxxx</A><BR></FONT></DIV>
<DIV><FONT
size=2>=================================================<BR></FONT></DIV>
<DIV><FONT size=2>Thanks to Walter for
the "XL_traders"-list<BR>------------------------------------------------------<BR><BR>Welcome
to the Excel Traders List.</FONT></DIV>
<DIV><FONT size=2>The purpose of this list is to exchange ideas and techniques
for using Excel in trading.</FONT></DIV>
<DIV><FONT size=2>This </FONT><FONT size=2>includes VB/VBA code as well.
<BR><BR>To send a message to the list, send message to: <A
href="mailto:XLtraders@xxxxxxxxxxxxxx";>XLtraders@xxxxxxxxxxxxxx</A> <BR><BR>To
SUBSCRIBE to the list, send an email message to: <BR><A
href="mailto:XLtraders-request@xxxxxxxxxxxxxx";>XLtraders-request@xxxxxxxxxxxxxx</A><BR>the
first (and only) line of the message should be:<BR>subscribe <BR><BR>To
UNSUBSCRIBE to the list, send an email message to: <BR><A
href="mailto:XLtraders-request@xxxxxxxxxxxxxx";>XLtraders-request@xxxxxxxxxxxxxx</A><BR>the
first (and only) line of the message should be:<BR>unsubscribe <BR><BR>Comments
about the list should be sent to:<BR> <A
href="mailto:XLtraders-owner@xxxxxxxxxxxxxx";>XLtraders-owner@xxxxxxxxxxxxxx</A></FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>=================================================</FONT></DIV>
<DIV><FONT size=4><STRONG>Delta </STRONG></FONT><FONT size=2>(Option
Delta)
(from the MetaStock Help)</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>Intro</FONT></DIV>
<DIV><FONT size=2>Delta shows the amount that the option's price will change if
the underlying security's price changes by $1.00.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Calculation Method <BR>For example, if XYZ is selling for
$105.00/share, a call option on XYZ is selling for $2.00 and the Delta is
75%,</FONT></DIV>
<DIV><FONT size=2>then the option's price should increase $0.75 (to $2.75) if
the price of XYZ increases to $106.00/share.</FONT></DIV>
<DIV><FONT size=2>In other words, the option should go up $0.75 for each $1.00
that XYZ goes up.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>Parameters ( for </FONT><FONT size=2>Option indicators Delta,
Gamma, Price, Theta, Vega )</FONT></DIV>
<DIV><FONT size=2>The parameters for the Option indicators are shown
below. These parameters are specified at the time the</FONT></DIV>
<DIV><FONT size=2>indicator is plotted. You can edit the parameters of an
existing plot by right-clicking on the indicator and</FONT></DIV>
<DIV><FONT size=2>choosing Properties from the shortcut menu.</FONT></DIV>
<DIV><FONT size=2><BR>Put or
Call. Choose the type of
option.<BR>Equity or Future. Choose the underlying security type.
The Black-Scholes model must be adjusted for</FONT></DIV>
<DIV><FONT
size=2>
options on futures, because no initial investment (other than a margin
deposit) is required</FONT></DIV>
<DIV><FONT
size=2>
to open a future position. You should choose Equity if you are
analyzing an index option.</FONT></DIV>
<DIV><FONT size=2>Expiration Date. Enter the date the option
contract expires. In the USA, this is usually the third Friday of
</FONT></DIV>
<DIV><FONT
size=2>
the expiration month.<BR>Strike
Price. Enter the option's strike
price.<BR>Interest Rate. Enter the
short-term "risk free" interest rate (e.g., 13-week T-bills). The interest
rate should</FONT></DIV>
<DIV><FONT
size=2>
be entered as a percentage (e.g., 4.75).<BR>Annual Dividend. Enter
the total of the most recent four quarters of dividend payments per share (e.g.,
3.00).</FONT></DIV>
<DIV><FONT
size=2>
If no dividends were paid, enter 0.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>Custom Indicator (i.e. Function Delta)</FONT></DIV>
<DIV><FONT
size=2>SYNTAX
delta( TYPE, DATE, PRICE, INTEREST, DIVIDEND )<BR>DESCRIPTION
Function calculates the predefined Delta indicator. </FONT><FONT
size=2>See the the option() function (see Put/Call Price) </FONT></DIV>
<DIV><FONT
size=2> for
a description of the parameters used in the delta()
function.<BR>EXAMPLE delta(
EC, 961220, 125, 7.50, 4.75 )</FONT></DIV>
<DIV><FONT size=2> </DIV></FONT>
<DIV><FONT size=2>See The gamma() function (see Gamma); the life() function
(see Option Life) ; the option() function (see Put/Call Price);</FONT></DIV>
<DIV><FONT size=2> the theta() function
(see Theta); the vega() function (see Vega); and the volo() function (see
Volatility, Option).</FONT></DIV>
<DIV><FONT size=2>
<DIV><FONT size=2>See Modifying an Indicator for information on the
Color/Style and Horizontal Lines pages.</FONT></DIV>
<DIV><FONT size=2>See Option Indicators for interpretation information on
Option indicators.</FONT></DIV></FONT></DIV>
<DIV><FONT
size=2>-----------------------------------------------------------------------------------</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=4><STRONG>Option Indicators</STRONG></FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>A brief interpretation of the Option Indicators in
MetaStock/OptionScope is provided on Pages 469-471. </FONT></DIV>
<DIV><FONT size=2>-Option Delta
<BR>-Option Expiration<BR>-Option Gamma<BR>-Option Life<BR>-Option
Price<BR>-Option Theta<BR>-Option Vega<BR>-Option Volatility</FONT></DIV>
<DIV><FONT size=2>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>For More on the Option Custom Indicators (i.e. the Option
Indicator Functions) see pages 218-251.</FONT></DIV>
<DIV><FONT size=2> </FONT></DIV></FONT></DIV>
<DIV><FONT size=2>See Using OptionScope for more information on these indicators
and option analysis.<BR>See Plotting an Indicator for more information on
plotting indicators.</FONT></DIV>
<DIV><FONT size=2>See Option Delta, Gamma, Price, Theta, Vega for more
information on the Option indicator parameters.</FONT></DIV>
<DIV><FONT
size=2>-----------------------------------------------------------------------------------</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=4><STRONG>Put/Call Price</STRONG></FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>Intro</FONT></DIV>
<DIV><FONT size=2>The Put/Call Price Indicator calculates the fair market value
of an equity. For more information see Using OptionScope.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Calculation Method</FONT></DIV>
<DIV><FONT size=2>The formula "option( EC, 961231, 125, 8.5, 6.31 )" calculates
the fair market value of an equity call that</FONT></DIV>
<DIV><FONT size=2>matures on December 31, 1996, at a strike price of $125.
The current market interest rates are 8.5%</FONT></DIV>
<DIV><FONT size=2>and the security paid an annual dividend of
$6.31.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>Parameters</FONT></DIV>
<DIV><FONT
size=2>TYPE
specifies whether the security is an Equity or a Future (i.e., E or F) and if a
Put or Call price</FONT></DIV>
<DIV><FONT
size=2>
(i.e., P or C) should be calculated. Valid TYPEs are EC, EP, FC, and
FP.</FONT></DIV>
<DIV><FONT
size=2>
(These types also can be spelled out as CALL, PUT, FUTURECALL, and
FUTUREPUT.)</FONT></DIV>
<DIV><FONT
size=2>DATE
is the date that the option expires. The DATE must be entered as a number
in the YYMMDD format.</FONT></DIV>
<DIV><FONT
size=2> For
example, December 31, 1996, should be entered as 961231.</FONT></DIV>
<DIV><FONT
size=2>
This date format is used regardless of the date format specified in the
Configuration section.</FONT></DIV>
<DIV><FONT
size=2>PRICE
price parameter specifies the option's strike price.</FONT></DIV>
<DIV><FONT size=2>INTEREST interest parameter
specifies a "risk free" market interest rate (e.g., 8.75).</FONT></DIV>
<DIV><FONT size=2>DIVIDEND dividend parameter
specifies the total dividends received over the last 12 months.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>
<DIV><FONT size=2>Custom Indicator (i.e. Function
Option)</FONT></DIV></FONT></DIV>
<DIV><FONT size=2><FONT
size=2>SYNTAX
option( TYPE, DATE, PRICE, INTEREST, DIVIDEND )<BR>DESCRIPTION The
FUNCTION calculates the predefined Put/Call Price
indicator.<BR>EXAMPLE option( EC,
961231, 125, 8.5, 6.31 ) </FONT></FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>SEE ALSO The delta() function (see Delta); the gamma()
function (see Gamma); the life() function</FONT></DIV>
<DIV><FONT
size=2>
(see Option Life); </FONT><FONT size=2>the theta() function (see
Theta); the vega() function (see Vega);</FONT></DIV>
<DIV><FONT
size=2>
and the volo() function (see Volatility, Option).</FONT></DIV>
<DIV><FONT
size=2>-----------------------------------------------------------------------------------</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2><FONT size=4><STRONG>OptionScope
</STRONG></FONT>(MetaStock Page 527)</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Intro</FONT></DIV>
<DIV><FONT size=2>OptionScope is a separate program provided with MetaStock that
is patterned after a spreadsheet.</FONT></DIV>
<DIV><FONT size=2>It is used to analyze options on futures and
equities.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2><FONT size=2>Using OptionScope</FONT> <BR>You run
OptionScope from within MetaStock by choosing OptionScope from the Tools menu or
by</FONT></DIV>
<DIV><FONT size=2>clicking the OptionScope button on the standard
toolbar.</FONT></DIV>
<DIV><FONT size=2><BR>With OptionScope you can:</FONT></DIV>
<DIV><FONT size=2>· calculate the fair market value of put and call
options.<BR>· calculate implied volatility to see what the "actual"
option's price is implying the volatility should be.<BR>· calculate delta,
vega, gamma, and theta (see Option Indicators) to study the sensitivity of the
option to changes in market conditions.<BR>· calculate "what-if"
scenarios.<BR>· display graphs of option positions.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=2>Program folder location</FONT></DIV>
<DIV><FONT size=2>The folder where the OptionScope program is located is
specified in the Application Options dialog</FONT></DIV>
<DIV><FONT size=2>(see File Locations Page).</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Help menu</FONT></DIV>
<DIV><FONT size=2>OptionScope includes an on-line help system that explains how
to use the program's features.</FONT></DIV>
<DIV><FONT size=2>Choose Contents from OptionScope's Help menu.</FONT><FONT
size=2></DIV><BR>
<HR>
</FONT>
<DIV><FONT size=2><BASE target=_top>
<META content="A description of volatility as it applies to stocks and options."
name=description>
<META
content="stock stock options options stocks stocks futures futures volatility volatility"
name=keywords>
<META content="Charles J. Kaplan" name=author></DIV>
<CENTER><A
href="http://www.smartclassroom.com/cgibin/adjuggler?img_click=/finance";></A> </CENTER>
<P>
<CENTER><FONT face="times new roman" size=+4><B>Equity Analytics,
Ltd.</B></FONT><BR><FONT face="times new roman" size=2>Phone: 516-696-9784 Fax:
516-696-9788<BR>E-Mail: <A
href="mailto:options@xxxxxxxxxxxxxxxxxxx";>mailto:options@xxxxxxxxxxxxxxxxxxx</A>
<P>
<TABLE border=0 cellPadding=5 width=425>
<TBODY>
<TR>
<TD align=justify vAlign=center><FONT color=#000000 face=Arial
size=2>Equity Analytics provides research and analysis such as: portfolio
modeling advisement, IPO assistance, individual company profiles, sector
analysis, and hedging strategies with derivatives for
institutions.</FONT></TD></TR></TBODY></TABLE>
<P>
<HR width="68%">
<P><FONT color=#000000 face=Arial size=4><B>Volatility </CENTER></B>
<P><FONT color=#000000 face="times new roman" size=3>This is part of a larger <A
href="http://www.e-analytics.com/optaaa.htm";>Options</A> site provided by <A
href="http://www.e-analytics.com/index.htm";>Equity Analytics, Ltd.</A>
<P>There are two kinds of volatility. Historical Volatility is a statistical
measurement of past price movements. Implied volatility measures whether option
premiums are relatively expensive or inexpensive. Implied volatility is
calculated based on the currently traded option premiums.
<P>Ideally, what traders would like to know is what the future volatility is
going to be. If we knew what the future volatility would be, we could make a
fortune quite easily. Because we don't know what future volatility is going to
be, we try to guess what it will be.
<P>The beginning point for this guess is historical volatility. What has the
volatility been for this stock or other security, over a given period of time.
Generally, when evaluating volatility, we look at several different periods. We
may look at what the volatility has been for the past week, for the past month,
for the past three months, for the past six months, and so forth. The longer
time period will yield more of an average volatility. However, don't expect
large changes in volatility over time. Stocks or other securities which are
volatile on a daily or weekly basis usually remain that way over time. When
evaluating the purchase of an option, it is the historical volatility of the
underlying security we are looking at. For instance, when deciding whether or
not to purchase an option on XYZ, we would look at the historical volatility of
XYZ. Basically, what historical volatility boils down to is, what is the
probability that this particular underlying security will move a particular
distance measured in price on a given day, week, month, etc.
<P>However, there is a different interpretation of volatility not associated
with the underlying security. This is implied volatility. There are many
different models for pricing options. However, most will yield a price
relatively close to each other.
<P>However, what if we use our historical volatility in the formula and come up
with a price far away from where the option is trading? What if we do this using
several different option pricing formulas and we still come up with a price
which is not close to where the option is trading? Why would we come up with a
price which can't be accounted for? We're all using the same inputs. We all use
the price of the underlying security, the time until expiration, the strike
price, dividends to be paid by the stock, the current risk free interest rate,
and volatility. All of these inputs are known. Or are they?
<P>The one input which is not known and for which we have to take a guess at is
volatility. What has happened is that the marketplace is assuming a different
volatility other than historical volatility. The way to solve for this implied
volatility is to use our option pricing model in reverse. We know the price of
the option and all the other variables except the volatility the marketplace is
using. Therefore, instead of using the equation to solve for the option's price,
we use the model to solve for the option's volatility. We insert the price into
the model, leave out the volatility (which we are looking for), and keep the
other variables the same. It is then that we will find out what volatility will
yield the current market price.
<P>Most traders refer to implied volatility as premium. To be precise, the word
premium refers to the option price relative to the underlying security.
Nevertheless, traders will say things like, "Premium levels are high." or
"Premium levels are low." What the trader is really referring to is the implied
volatility. The implied volatility is high or the implied volatility is low.
<P>The first thing that one thinks about when trying to evaluate historical
volatility is that the standard deviation should be used. And if a person is
looking for a simple way to measure volatility, the simple standard deviation
will work well enough. However, use of the standard deviation assumes that there
is a normal distribution. If stock prices were normally distributed, the
implication would be that there could be negative prices. This we know is
impossible. The furthest a stock's price can fall is to zero. However, the stock
price can rise infinitely. Therefore, we take the standard deviation of the
logarithmic price changes measured at regular intervals of time.
<P>
<CENTER><FONT size=4><B>Formula For Calculating A Stock's Volatility Using a
Lognormal Distribution</B></CENTER>
<P>Xi = ln[Pi divided by ((1+r)/52))Pi-1]
<P><FONT size=3>Where:
<P>Xi = each price change
<P>Pi = price of the underlying security at the end of the i-th period
<P>r = risk free interest rate (We are using weekly data in this formula. For
daily data use 253)
<P>Step two is to calculate the standard deviations lognormal for the data
series. This would be the price changes for the period under consideration. For
example, using weekly data, we would calculate the above calculation for each
week for at least 14 weeks.
<P>Step 3 is to sum the answer for each calculation in step 2 and divide by 14.
This gives us the mean.
<P>In Step 4 we subtract each calculation from the mean.
<P>In Step 5 we square each number from step 4 and add them all together.
<P>Step 6 The annualized historic volatility is the answer from step 4 X the
square root of (365/7)
<P>This entire calculation is easily set up in a spreadsheet like Excel.
Additionally, good technical analysis software will usually perform this
calculation. In OptionVue 4, which is a software product dealing specifically
with options and futures, the historical and implied volatility are both
displayed for each strike.</P><FONT face=Arial size=2>
<HR width="90%">
<P align=center><A href="http://www.e-analytics.com/index.htm";>Equity Analytics,
Ltd.</A> </FONT></P></FONT>
<CENTER><FONT color=#000000 face="times new roman" size=2>All that is contained
in the different sections of this web site, is written and copyrighted
by:<BR>Charles J. Kaplan, President, Equity Analytics, Ltd.</FONT></CENTER>
<P>
<DIV></FONT><FONT size=2></FONT> </DIV>
<DIV><FONT
size=2>==========================================</FONT></FONT></FONT></FONT></FONT><BR><FONT
size=2>----- Original Message ----- <BR>From: Maurice Zandbelt <<A
href="mailto:maza95@xxxxxxxxx";>maza95@xxxxxxxxx</A>><BR>To: metastock list
<<A
href="mailto:metastock@xxxxxxxxxxxxx";>metastock@xxxxxxxxxxxxx</A>><BR>Sent:
zaterdag 17 april 1999 0:21<BR>Subject: implied volatiliy and
excel<BR><BR><BR>> I hope somebody can help me.<BR>> <BR>> I use
metastock 6.0, I use option scope to calculate the options implied<BR>>
volatility. I am also using excel with a DDE (dynamic data exchange).<BR>>
<BR>> I want to make a excel worksheet which calculates during trading
hours,<BR>> the delta of the option which I sold short. Can somebody help me
with<BR>> the formula to calculate the implied volatility or delta when I
already<BR>> have the price of the option ?<BR>> <BR>> Best
regards,<BR>> <BR>> Maurice Zandbelt<BR>> <BR>> <BR>> <BR>>
<BR>> <BR>> <BR>></FONT></DIV></BODY></HTML>
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From: malcolm.scott@xxxxxxxxx (malcolm.scott@xxxxxxxxx)
To: "Metstock List" <metastock@xxxxxxxxxxxxx>
Subject: Expert Trend
Date: Sun, 18 Apr 1999 11:25:35 +0100
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Data window options "Column data" and "Expert trend". I cannot find in help
or
the manual what these mean. Can anyone say where to find this info or what
they are?
Malcolm
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