Investor Protection/Calculating Theoretical Options Price

Calculating Theoretical Options Price

* Methodology of Calculating Theoretical European Options Price *
Spot price of the underlying index
Strike price
Volatility	%	Call	Put
Risk-free interest rate	%	Call	Put
Dividend yield	%	0	0
Time to expiration
expiration month
Time to expiration
Note:
I. Calculating Theoretical Options Price: Enter the number in the box below, click the “Calculate Theoretical Options Price” button, and the theoretical price of the call and put will be displayed.
1. Spot price of the underlying index:
Enter the current price of the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX Index).
2. Strike price:
Enter the strike price of the options contract for which you wish to calculate the theoretical price.
3. Volatility:
Enter the yearly volatility of the spot index. Users must estimate this figure themselves, and can typically use the historical volatility.
4. Risk-free interest rate:
Enter the risk-free interest rate. The interest rate for time deposits at banks or commercial paper can generally be used.
5. Dividend yield:
Enter the annual cash dividend yield for the TAIEX Index.
6. Time to expiration:
You can choose to enter the expiration month you wish to calculate and let the system automatically calculate the number of days remaining from the present date to the expiration date, or you can enter the number of business days (or years) to expiration yourself.
II. Calculating Implied Volatility If you wish calculate the implied volatility, click on the “Calculate Implied Volatility” button, which will bring up a small window. Choose call or put options, input the premium, click on the “Calculate” button, and it will calculate the implied volatility based on the previously entered index price, strike price, risk-free interest rate, cash dividend yield, and time to expiration.

Note: This calculation utilizes the Black-Sholes options pricing model. The results are provided for reference only and do not represent actual prices. Traders engaging in options trading should consider all market factors, not just theoretical options prices. TAIFEX bears no responsibility for traders’ investment decisions.
If you experiences any problems with the website or would like to offer feedback, please contact us at: service@taifex.com.tw

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