Options Trading has its advantages. Experienced investors who trade options can see amplified gains and potentially control their losses compared to investors who trade stocks.
But even though a lot of us get the basics of how options work, we usually run into a bunch of issues when it's time to actually trade, such as not knowing whether the valuation of the options in our hands is too high or too low.
Don't worry, we can solve this problem with Options price calculator.
Data source: Tiger Trade app
In order to calculate the theoretical price of an option in a given implied volatility and at a specific future time when the stock price is at a certain level, you can use the Price Calculator feature in the app.
Here's how you can use the Price Calculator in Tiger Trade app to calculate the theoretical price of an option:
Open the app and go to the options trading section.
Find and select the "Price Calculator" section
Next, you need to input the following information to calculate the theoretical price of the option:
Choose the type of option (call or put).
Enter the current price of the underlying asset (stock price).
Enter the strike price of the option.
Set the expiration date of the option.
Input the predetermined implied volatility.
Once you've filled in everything needed, hit the calculate button. The app will use an options pricing model to automatically figure out the option's theoretical price and how much you might gain or lose based on the details. This way, you can see the expected price of the option on May 26, with AAPL stock at $172.23 and implied volatility at 29.02%.
Just FYI, the options pricing model depends on some assumptions and math formulas. The real market prices might be different from the theoretical prices it calculates. So only use these theoretical prices as a reference. When actually trading, in practice, other factors such as option volume, stock fundamentals, and market sentiment should be considered
Data source: Tiger Trade app