Exploring the Benefits of Options Analytics
Options analytics is the set of calculations traders use to understand an option position: its current value, time to expiry, Greeks (delta, gamma, theta, vega), implied volatility, breakevens, and profit or loss across possible stock prices. These numbers do not predict where a stock will go; they show how a position is likely to react to price moves, time, and volatility, so you can size and manage risk. MarketXLS provides a free web options profit calculator and Excel functions such as =QM_GetOptionQuotesAndGreeks("AAPL") for chains with Greeks. This article is educational, not investment advice.
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Analyzing Open Positions
One of the most practical uses for options analytics is analyzing open positions. By using this type of analysis, investors can see how much an option is currently worth, when it expires, and the estimated return on the position. This information can help investors determine which positions should be closed, or opened up in the future. When considering new positions, the same analytics show what a trade needs from the stock (direction, size of move, and time) to be profitable.
Risk Management Strategies
Options analytics are also extremely beneficial for risk management strategies. With this type of analysis, investors are able to identify potential risks as well as calculate the associated probabilities and risk-reward frameworks. Using this information, investors can size positions and choose structures (for example spreads instead of single options) that match how much they can afford to lose.
Understanding Volatility and Greeks
Options analytics can also help investors understand how volatility and the “Greeks” affect their investments. The Greeks measure how an option's price responds to each input: delta to a $1 move in the stock, gamma to the change in delta, theta to one day of time decay, and vega to a one-point change in implied volatility. Knowing them tells you which risk a position is actually carrying.
Using the Options Calculator
An options calculator shows the profit or loss of a position at different stock prices and dates, plus its breakevens and maximum profit and loss. Comparing strategies side by side shows which one fits your outlook and risk limit; it cannot tell you which will make the most money.
MarketXLS
MarketXLS offers a free web Options Profit Calculator for payoff charts, and an Excel add-in that pulls option chains, Greeks, and implied volatility into spreadsheets, for example =QM_GetOptionChain("AAPL") and =QM_GetOptionQuotesAndGreeks("AAPL"). In the add-in, options data is end-of-day on the Standard plan and real-time on the Advanced and Business plans.
Related reading:
The Power of Rolling Your Options
How to Manage Risk with Calendar Spread Options
Marketxls New Release Version 9.2
Mastering the Art of Shorting Call Options