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Technical Stuff

All options valuation in Options Portfolio Analyzer is based on the Black-Scholes option pricing model. The authors know that many academics have worked on more complex and computation-intensive models. However, it is the experience of many traders with long experience that the extra complication buys you little. The only real difference is for stock options that are deep in the money, where the possibility of early exercise makes some sense. Even there, the current regime of low interest rates makes the difference minuscule.

Only listed stock options are analyzed. The next update will include options on listed commodity futures. Longer term, we may add over-the-counter options, swaptions  and exotic options, as demand warrants. All options are in $US.

All data is delayed at least 20 minutes. We are working on a real-time feed, but we do not feel it is urgent. This is an analysis app, not a trading app. You should spend at least ten or 20 minutes at a time using it and going through the various risk indicators and risk-reduction strategies. Then go to a trading screen and do what you have decided.

All the graphs have an X-axis of stock price. The Y-axis varies:
    Delta is expressed in number of equivalent shares of the portfolio. If you are long shares or calls, or if you are short puts, this will be positive.
    Vega is expressed as the $US value to the portfolio of a 1% increase in volatility across all items in the portfolio. If you are long as option, this will be positive.
    Theta is expressed as the $US value to the portfolio of a 1-day time decay. If you are long an option, this will be negative.
    Gamma is expressed as the change in delta of a $1 move up in price. This is expressed in shares. If you are long an option, this will be positive.

One source of possible error is in dividends. Future dividends enter into the Black-Scholes calculation, but no one is sure what they will be. We have done our best to find out what current dividends are, but we give no assurances we have gotten everything correct. Also, we have assumed that current dividends will continue into the future. For most stocks this should not make a major difference. However, if a stock has a major change in dividend policy, such as occurred at the US banks in 2008,  the results could be incorrect.