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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?OptiView's option P&L visualization tools shows an option strategy's simulated performance across different underlying prices over time. OptiView displays projected profit and loss under current market conditions, allowing users to evaluate payoff, risk, and breakeven points before expiration.
Strategy Builder
How do I stress test my strategy in OptiView?OptiView's Stress Test tool 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 the strategy payoff. The panel also includes macro scenario presets based on historical market events.
Strategy Builder
What does the OptiView Historical IV tool show?The OptiView volatility tool shows your selected option(s) historical implied volatility and distribution for deeper identification of deviating IV regimes. The tool calculates this for both single and multi-leg option strategies, allowing you to identify periods of elevated and/or depressed IV.