Updating an estimate for an existing calculation on Options Profit Calculator
Posted Jun 12 2020
The situation: You made a calculation on Options Profit Calculator, and want to see updated estimates based on current Implied Volatility.
Note: We’re going to be making it a lot easier to update calculations, but for now it’s important to know how to adjust existing calculations to account for IV fluctuations.
Working example: TSLA long call
- Long Call: TSLA 12th Jun ’20 $800 Call,
- Price at purchase: $63.10 on 13th May 2020 / TSLA at $790.96
- Price at time of writing: $59.60 on 25th May 2020 / TSLA at $826.75
The original calculation looks like this (see it here):
As you can see in the ‘IV (implied volatility)‘ field, IV at the time was 73.9.
The calculator estimated that at the current TSLA price of ~$827 on May 25th, the Call option would be worth $68.26, up 8%.
However, we know from our brokerage account that is currently trading in the $59 range.
Let’s update it, then understand what happened.
Step 1. Update stock and option price
Click ‘Get price’ to update the price for the Underlying stock symbol
Use the ‘Select Option’ button to reselect the option at the best price (e.g. mid price).
Notice that when you do this, the IV field will reset to “(auto)”, which means the calculator will calculate IV again, based on the current price and date*.
*If you have updated the ‘calculation date’ field which is under the ‘more output options’ panel, remove the custom date or it will throw things off.
Step 2. Calculate to get the current IV
Click ‘Calculate‘, and you will see that the IV has been recalculated. It’s now 60.176. Yikes, that’s a big drop in IV.
Step 3. Re-enter the amount paid for the option
In the option’s ‘Price per option’ field, enter the price you paid, e.g. 63.10.
Clicking ‘Calculate‘ again will show you the best current estimates, using the option’s current Implied Volatility.
View the updated calculation here: http://opcalc.com/96D
It’s important to understand the effect of changes to IV on your option trade’s outlook.