Black-Scholes Calculator

Option calculator that calculates the implied volatility given an option price.

This handy calculator can download the prices of US equities from Google and short-term treasury yields from the treasury.gov website. Most calculators are not clear as to what risk-free rate you should use. Some will simply default to a number, such as 5%, which would be completely inappropriate for the past few years in which we have had interest rates near zero. Theoretically you should use the treasury yield that most closely matches your options time-to-expiration. Example, if your option expires in 3 months, use the 3 month treasury rate. This calculator automatically downloads the most recent 1 year treasury rate. Adjust this accordingly.

Another useful feature is that the calculator allows you to see the implied volatity that is currently reflected on market prices. Calculations for the most useful option greeks are automatically provided as well (Delta, Gamma, Theta, Vega, and Rho).

If a dividend is provided as an input, the calculator subtracts the present value of the dividend from the stock price and then runs the discounted figure through the Black-Scholes calculation. Even if a dividend is automatically downloaded from the Google server, make sure that it happens within your time-to-expiration. If the ex-dividend date is not within your option-holding-period, remove the dividend figure.

Date inputs are in days to make it more user friendly. It always annoys me to use a calculator that takes yearly inputs. How many times have you held an option for exactly 1 year? To save you the calculation, an alternative calendar picker is provided that automatically calculates how many days are until expiration or dividend payment.

This calculator is completely FREE. There are no annoying banners, registration, or license agreements. The only permissions required by this app are "Internet" and "Network Status" (because the calculator downloads prices from Finance.Google.com and Treasury.gov). This calculator does not collect or store any personal data. The only thing that I ask is that you be careful and not rely on any single tool to make option purchasing/selling decisions. Options are extremely risky and I am not responsible if you lose your hard-earned money. Keep in mind that the Black-Scholes model is not a holy grail and it makes many unrealistic assumptions. Some of these assumptions are that you will be holding the option until expiration and that the market prices fit perfectly into a normal distribution. Just do some research on Long-Term-Capital Management to see how dangerous some of these assumptions can be.

I hope this helps you to make money. Happy trading.

Valtinho