What the Option Evaluator is
The Option Evaluator is an excel file which calculates the outcome of the options trading strategy that you set up.
What Option Evaluator gives you
The file calculates the percentage of success, and the average, median and standard deviation of the outcome at the exit date determined by you.
To estimate the “Probabilities & Results”, the file generates twenty thousand calculations (using the Montecarlo theory) through twenty thousand different casual prices of the underline stock within the minimum and maximum price calculated according to the minimum and maximum volatilty of the stock.
How you can use the Option Evaluator
Using different strike prices and/or expiry dates, within the logics of this Option strategy, you have the possibilty to compare different set of stock options, and then to pick the best for your strategy.
You have also the possibility to check the result of your option trade by updating the “current” quotes of the options.
What this file does not give you
This file does not predict the movement of the stock nor the future options movements.
How to use the file
1. Choose the stock on which you want to create the option strategy
2. Pick the options according to the logics of the charts here below, representing the long and short option strategy
3. Fill out the data in the cells in light yellow of the Dashboard.
In particular, “Vol” is the historical volatility of the stock, reported in the various web sites together with the quotes of the options; the file uses the “Vol” to calculate the value of the Implied Volatility (“IV”).
You can find the Historical Volatility values in many websites, where you can also check the values of the highest and lowest of the recent period.
4. Using the values of the historical volatility “Vol” and those of the implied volatility (IV), proceed to determine the mininum and maximum volatility and fill out the boxes Min Vol and Max Vol accordingly.
5. Run the calculations: menu “Formulas”, command “Recalculate now“
6. See the results in the “Probabilities & Results” box
7. Compare different expiry dates and/or different set of options and see which combination give you the highest probabilities and value of return.
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