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# Calculating the Greeks Using an Options Calculator

09/30/2015 8:00 am EST

Focus: OPTIONS

Alan Ellman

President, The Blue Collar Investor Corp.

For the benefit of all new traders interested in more in-depth options education about the Greeks, options expert Alan Ellman of TheBlueCollarInvestor.com demonstrates one way to access the Greek stats for any option using these free online resources.

The Greeks are a mathematical means of estimating the risk of stock options. Delta measures the change in the option price due to a change in the stock price, Gamma measures the change in the option delta due to a change in the stock price, Theta measures the change in the option price due to time passing, Vega measures the change in the option price due to volatility changing, and Rho measures the change in the option price due to a change in interest rates. In this article, I will demonstrate one way to access the Greek stats for any option using free online resources. More specifically, in this segment I will use an options calculator provided by iVolatility.com, a company for which I write monthly journal articles (whenever I publish articles or commentary in other financial publications, the information is always available on The Blue Collar Investor Web site first).

The Calculator Prior to Entering Information

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Highlighted in Yellow

• The top box is where the stock ticker is entered and then go is clicked
• The remaining three highlighted boxes are where information may need to be changed

Calculations after entering the ticker for Skyworks Solutions (SWKS)

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Note the Following:

• After entering SWKS and clicking on go the nearest the money strike (\$97.50) and nearest expiration (4 days away) come up automatically
• The Greek stats for both the \$97.50 call and puts options are shown on the right side
• Interest rate and dividend information is entered by the calculator
• The green arrows highlight the boxes where we may want to change the input to generate additional information as shown below

Reading the Stats for the \$97.50 Call Option (all other factors remaining the same)

• Delta: For every \$1.00 change in share price (\$97.71), option value (\$1.9982) will change by \$0.5275
• Gamma: For every \$1.00 change in share price, delta will change by \$0.0843
• Theta: For every one calendar day that passes, option value will decline by \$0.2369
• Vega: For every 1% change in security implied volatility, option value will change by \$0.0408
• Rho: For every 1% change in the risk-free interest rate, option value will change by \$0.0055

Changing Strike Price, Expiration Dates, and Premium Amount

In the screenshot below, we will alter the stock price, expiration date, and—on the right side bottom—enter a new option premium to get an updated implied volatility stat (click on calculate in the middle of the calculator to update information):

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Notice that the Greeks changed as we used a different strike price and expiration date. Also, we entered an up-to-date option premium for the \$95.00 call option which reflected an implied volatility of 46.35 compared to the 43.45 shown on the right side of the screenshot.

Discussion

There are many available free online tools for calculating option pricing factors. The calculator provided by iVolatility.com is an outstanding example.

By Alan Ellman of TheBlueCollarInvestor.com

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