Recently, I uploaded to my downloads section the Excel file I am using to calculate the fair value of Call / Put option using the Black Scholes formula.

As an option trader and a premium seller, I use this file a lot as a reference to understand the spot / time impact on my option value. To use it, you may select the graphs page where the prices and Greeks are shown:

For example, I selected the Graphs(S) tab and put in the values for an option with the strike of 100$, then, the range of 80$ – 120$ for the spot values. You may see clearly the impact of spot movement on the different outputs:

  1. Call price increases as the spot increases and passes the strike price vs. the put price which gradually gets smaller.
  2. Gamma has maximum value ATM.
  3. Delta reaches 0.5 / -0.5 for the call / put option ATM
  4. finally, Theta is at its maximum ATM.

changing the days to expiry (DTE) to a shorter value, in this case to 1, gives the following picture which resembles the values close to expiry:

  1. Call price decreases with time until there is no time value left.
  2. Gamma grows as time runs out, reaches maximum ATM.
  3. Delta decreases with time as there is less probability to end in ITM.
  4. finally, Theta decreases with time.

As a premium seller and short option trader, it’s important to know the different effects of spot and time on the option prices. Use this Excel as a tool for your trading. The other tabs shows the mathematics behind it all:

Trade responsibly,
Roy

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