What Pricing Model Does OptiView Use for Option Pricing?
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What pricing model does OptiView use for options pricing?

OptiView calculates theoretical option prices using established option pricing models such as Black-Scholes. OptiView uses market-derived inputs including implied volatility, interest rates, dividend yield, and the bid-ask spread.

Pricing models

  • Black-Scholes model with continuous dividend yield
  • Implied volatility models including constant volatility and local volatility approaches
  • Pricing aligned with no-arbitrage conditions observed in option markets

Key inputs

  • Implied volatility derived from current option market prices
  • Risk-free interest rates used to discount future payoffs
  • Continuous dividend yield based on market expectations
  • Underlying price and contract specifications, using real-time or delayed data depending on availability

Assumptions and limitations

  • Bid-ask spread is approximated based on observed market spreads
  • Expired options are assigned zero value after expiration
  • Returns are calculated before taxes and transaction costs
  • Dividends are modeled as a continuous yield, with declared payouts not explicitly considered in the calculations
  • Dividend yield is inferred under no-arbitrage conditions and may change over time
  • Theoretical prices may differ from actual market prices due to liquidity and market conditions

Related Questions

Charting
What does options P&L visualization show?Options P&L visualization shows how an options strategy performs across different underlying prices over time. OptiView displays projected profit and loss, allowing users to evaluate payoff, risk, and breakeven points before expiration.
Strategy Builder
How do I adjust model assumptions in OptiView?OptiView's Assumptions panel* lets users override the default inputs used in options pricing calculations. Users can adjust implied volatility, the risk-free interest rate, and dividend yield to evaluate how each assumption affects strategy payoff. The panel also includes macro scenario presets based on historical market events.
Strategy Builder
What does the OptiView volatility surface show?The OptiView volatility surface* maps implied volatility across all available strikes and expiration dates for a selected underlying asset. OptiView uses this surface to price option strategies and, with a Plus subscription, users can switch from constant implied volatility to a local volatility model for more accurate P&L projection.