Option Calculator

The user enters values in column B.
The worksheet calculates the remaining values

Value of Underlying Asset
Exercise Price
T-bill rate
Time remaining
Standard Deviation
$50.0000
$45.0000
5.0000% Enter the continuously compounded annual rate as a decimal fraction. The value
0.1644 Enter time in years. This value may be a fraction, such as 30/365 (type the follo
20.0000% Enter as decimal fraction. The value is displayed as a percentage.
The following values are computed by the worksheet:

Value of Call Option:
$5.5085
Value of Put Option:
$0.1402
PV of Exercise Price
d(1)
d(2)
N(d1)
N(d2)
$44.63
1.4412325546
1.3601440692
0.9252
0.9131
Delta
Gamma
Rho
Theta
Vega
This worksheet calculates the value of call or put options using the
Black/Scholes model.
In the case of a call option, the choice is to buy the underlying asset for the exercise
price stated in the contract.
In the case of a put option, the choice is to sell the underlying asset for the exercise
price stated in the contract.
In either case, the appropriate action can be chosen on the expiration date of the option.
aining values
s a decimal fraction. The value is displayed as a percentage.

such as 30/365 (type the following: =30/365).
as a percentage.
0.9252
0.0348
6.6992
-3.7791
2.8626
The user enters values in column B. The worksheet calculates the remaining values
Exercise Price
Market premium of call option
T-bill rate
Time remaining
Estimated Standard Deviation
$50.0000
$45.0000
6.0000
5.0000% Enter the continuously compounded annual rate as a decimal fraction.
0.2466 Enter time in years. This value may be a fraction, such as 30/365 (typ
23.4674% Make an initial guess to start the program. Enter as decimal fraction.

Revised Implied Standard Deviation
23.4674% Press the ""Calculate ISD" button
Model Value of Call Option:
$6.0000
Model Value of Put Option:
$0.4486
d(1)
d(2)
N(d1)
N(d2)
$44.45
1.0682094539
0.9516789752
0.8573
0.8294
This worksheet calculates the implied standard deviation of call options using the
In the case of a call option, the choice is to buy the underlying asset for the exercise price stated in
the contract.
To use this worksheet, enter the values for the underlying asset, the exercise price, the market
premium for the call option, the T-bill rate, the time remaining until expiration, and an initial
estimate of the standard deviation.
Then press the "Calculate ISD" button. The worksheet will revise until the "Estimated Standard
Deviation" matches the "Revised Implied Standard Deviation." Alternatively, you can press the
"Command," "Option," and "s" keys simultaneously in order to launch the iterative process.
If put/call parity is violated, then the "Estimated Standard Deviation" will not match the "Revised
Implied Standard Deviation." In extreme cases an error notification will appear.
If you did not enable macros when you opened this workbook, the button won't function. You can
still work the calculation by using the "Revised Implied Standard Deviation" as a guide for making
new entries in the "Estimated Standard Deviation." You should be able to get close in four to five
repetitions.
emaining values
annual rate as a decimal fraction. The value is displayed as a percentage.

be a fraction, such as 30/365 (type the following: =30/365).
ogram. Enter as decimal fraction. The value is displayed as a percentage.
he worksheet:
Delta
Gamma
Rho
Theta
Vega
options using the
he exercise price stated in
cise price, the market

ation, and an initial
e "Estimated Standard
ely, you can press the
iterative process.
not match the "Revised

ppear.
won't function. You can

n" as a guide for making
get close in four to five
0.8573
0.0387
9.0898
-4.5074
5.5985
Exercise Price
Market premium of put option
T-bill rate
Time remaining
Estimated Standard Deviation
$50.0000
$45.0000
1.1000
5.0000% Enter the continuously compounded annual rate as a decimal fraction.
0.2466 Enter time in years. This value may be a fraction, such as 30/365 (typ
33.4423% Make an initial guess to start the program. Enter as decimal fraction.

Revised Implied Standard Deviation
33.4423% Press the ""Calculate ISD" button
Model Value of Call Option:
$6.6514
Model Value of Put Option:
$1.1000
d(1)
d(2)
N(d1)
N(d2)
$44.45
0.7917359906
0.6256734877
0.7857
0.7342
This worksheet calculates the implied standard deviation of put options using the
In the case of a call option, the choice is to buy the underlying asset for the exercise price stated in
the contract.
To use this worksheet, enter the values for the underlying asset, the exercise price, the market
premium for the call option, the T-bill rate, the time remaining until expiration, and an initial
estimate of the standard deviation.
Then press the "Calculate ISD" button. The worksheet will revise until the "Estimated Standard
Deviation" matches the "Revised Implied Standard Deviation." Alternatively, you can press the
"Command," "Option," and "s" keys simultaneously in order to launch the iterative process.
If you did not enable macros when you opened this workbook, the button won't function. You can
still work the calculation by using the "Revised Implied Standard Deviation" as a guide for making
new entries in the "Estimated Standard Deviation." You should be able to get close in four to five
repetitions.
emaining values

ogram. Enter as decimal fraction. The value is displayed as a percentage.
he worksheet:
Delta
Gamma
Rho
Theta
Vega
options using the
he exercise price stated in
cise price, the market

ation, and an initial
e "Estimated Standard
ely, you can press the
iterative process.
won't function. You can

n" as a guide for making
get close in four to five
0.7857
0.0351
8.0472
-6.5415
7.2400
Value of First Asset
Value of Second Asset
Time remaining
Standard Deviation of the First Asset
Standard Deviation of the Second Asset
Correlation of returns for asset one and asset two
$4,000.0000
$3,000.0000
1.0000
40.0000%
20.0000%
0.5000
Enter
Enter
Enter
Enter
time in years. This value may be a fraction, suc

as decimal fraction. The value will be displayed
as decimal fraction. The value will be displayed
as decimal fraction. The range for this value is

$1,135.4454
$135.4454
Variance of the Price Ratio, Asset1/Asset2

Standard Deviation of the Price Ratio, Asset1/Asset2
d(1)
d(2)
N(d1)
N(d2)
12.0000%
34.6410%
1.0036716906
0.6572615291
0.8422
0.7445
This worksheet calculates the value of an option to exchange one asset for another.
In the case of a call option, the choice is to give up the second asset in order to receive the first asset.
In the case of a put option, the choice is to give the first asset and receive the second asset.
The model used here was first published by William Margrabe.
maining values
This value may be a fraction, such as 30/365 (type =30/365).

tion. The value will be displayed as a percentage.
tion. The value will be displayed as a percentage.
tion. The range for this value is from -1 to +1.
puted by the worksheet:
e asset for another.
rder to receive the first asset.
e the second asset.
Exercise Price
T-bill rate
Time remaining
Standard Deviation
$50.0000
$50.0000

$2.2895
Value of Covered Call position:
$47.7105
d(1)
d(2)
N(d1)
N(d2)
$49.39
0.1737972366
0.07448453
0.5690
0.5297
Delta of covered call position:
This worksheet calculates the value of a covered call position using the
In the case of a covered call, the investor buys the underlying and simultaneously sells a
call option. The result is lower investment outlay and reduced delta, compared with a
naked position in the underlyling.
aining values

as a percentage.
0.4310
Exercise Price
T-bill rate
Time remaining
Standard Deviation
$50.0000
$50.0000

$1.6769
Value of Protective Put position:
$51.6769
d(1)
d(2)
N(d1)
N(d2)
$49.39
0.1737972366
0.07448453
0.5690
0.5297
Delta of protective put position:
This worksheet calculates the value of a protective put position using the
In the case of a protective put, the investor buys the underlying and simultaneously buys
a put option. The result is higher investment outlay and reduced delta, compared with a
naked position in the underlyling.
Note: Delta for the protective put position is the same as the delta for the call
aining values

as a percentage.
0.5690
Exercise Price
T-bill rate
Time remaining
Standard Deviation
$45.0000
$45.0000

Value of call:
Value of put:
$2.0606
$1.5092
Value of Straddle:
$3.5697
d(1)
d(2)
N(d1)
N(d2)
$44.45
0.1737972366
0.07448453
0.5690
0.5297
Delta for the straddle
This worksheet calculates the value of a Straddle using the Black/Scholes

model.
A Straddle is made from calls and puts with the same exercise price, the same
underlying, and the same expiration. A long straddle is long one call and long one put.
When the stock price is above the present value of the exercise price, the delta is
positive. As the stock rises from there, the value of the straddle increases, and the delta
rapidly grows toward +1.
If the stock moves below the present value of the exercise price, delta soon becomes
negative and shrinks rapidly as the value of the underlying declines (toward 1). As the
stock price falls over this range, the value of the straddle increases.
A short straddle is short one call and short one put. Going short provides an inflow at
the time the straddle is established, and reverses the delta scenarios.
aining values

as a percentage.
holes
e
g one put.
ta is
nd the delta
ecomes
1). As the
inflow at
0.1380
Exercise Price
T-bill rate
Time remaining
Standard Deviation
$47.5000
$45.0000

Value of call:
Value of put:
$3.7384
$0.6870
Value of Strap:
$8.1637
d(1)
d(2)
N(d1)
N(d2)
$44.45
0.7182111702
0.6188984635
0.7637
0.7320
Delta for the strap
This worksheet calculates the value of a Strap using the Black/Scholes model.
A Strap is a straddle augmented on the bullish side. It is made from calls and puts with
the same exercise price, the same underlying, and the same expiration. A long strap is
long two calls and long one put.
When the stock price is above the present value of the exercise price, the delta is
positive. As the stock rises from there, the value of the strap increases, and the delta
rapidly grows toward +2.
If the stock moves below the present value of the exercise price, delta soon becomes
negative and shrinks rapidly as the value of the underlying declines (toward 1). As the
stock price falls over this range, the value of the strap increases.
A short strap is short two calls and short one put. Going short provides an inflow at the
time the strap is established, and reverses the delta scenarios.
aining values

as a percentage.
es model.
d puts with
ng strap is
ta is
the delta
ecomes
1). As the
flow at the
1.2911
Exercise Price
T-bill rate
Time remaining
Standard Deviation
$46.0000
$45.0000

Value of call:
Value of put:
$2.6725
$1.1211
Value of Strip:
$4.9146
d(1)
d(2)
N(d1)
N(d2)
$44.45
0.3951073536
0.2957946469
0.6536
0.6163
Delta for the strap
This worksheet calculates the value of a Strip using the Black/Scholes model.
A Strip is a straddle augmented on the bearish side. It is made from calls and puts with
the same exercise price, the same underlying, and the same expiration. A long strip is
long one call and long two puts.
When the stock price is below the exercise price, the delta is negative. As the stock falls
from there, the value of the strip increases, and the delta rapidly grows toward 2.
If the stock moves above the exercise price, delta soon becomes positive and grows
rapidly as the value of the underlying rises (toward +1). As the stock price rises over
this range, the value of the strip increases.
A short strip is short one call and short two puts. Going short provides an inflow at the
time the strip is established, and reverses the delta scenarios.
aining values

as a percentage.
es model.
d puts with
ng strip is
e stock falls
rd 2.
d grows
ses over
ow at the
-0.0391
1st Exercise Price
2nd Exercise Price
T-bill rate
Time remaining
Standard Deviation
$47.5000
$45.0000
$50.0000

Value of put at 1st exercise price:
Value of call at 2nd exercise price:
$0.6870
$1.1205
Value of Strangle:
$1.8075
d(1)
d(2)
N(d1)
N(d2)
Delta for the spread
$44.45
$49.39
0.7182111702 -0.34268546
0.6188984635 -0.44199817
0.7637
0.3659
0.7320
0.3292
This worksheet calculates the value of a Strangle using the Black/Scholes

model.
A Strangle is made from calls and puts with two different exercise prices, with the price
of the underlying between them (say, exercise prices at 45 & 50, with the underlying at
47.50). Both of the options have the same underlying and the same expiration.
A long strangle is long one call at the higher exercise price and long one put at the lower
exercise price (both options out-of-the-money). With both options out-of-the-money, the
cost of entry is relatively low.
Over much of the space between exercise prices, the delta is positive. If the stock
moves above the 2nd exercise price, delta is positive and grows rapidly larger (toward
+1) as the value of the underlying rises. If the stock moves below the 1st exercise price,
delta is negative and shrinks rapidly as the value of the underlying declines (toward 1).
A short strangle is short one call at the higher exercise price, and long one put at the
lower exercise price. Going short provides an inflow at the time the spread is
established, and reverses the delta scenarios.
aining values

as a percentage.
holes
h the price
derlying at
on.
at the lower
money, the
stock
r (toward
ercise price,
toward 1).
ut at the
0.1296
1st Exercise Price
2nd Exercise Price
T-bill rate
Time remaining
Standard Deviation
$46.0000
$45.0000
$50.0000

Value of 1st Call:
Value of 2nd Call:
$2.6725
$0.6584
Value of Bull Money Spread:
$2.0141
d(1)
d(2)
N(d1)
N(d2)
$44.45
$49.39
0.3951073536 -0.66578928
0.2957946469 -0.76510198
0.6536
0.2528
0.6163
0.2221
This worksheet calculates the value of a Bull Money Spread using the
A Bull Money Spread is made from call options with two different exercise prices (say, 45
& 50). Both of the options have the same underlying and the same expiration.
A long bull spread is long one call at the lower exercise price and short one call at the
higher exercise price.
A short bull spread is short one call at the lower exercise price and long one call at the
higher exercise price. Going short provides an inflow at the time the spread is
established, with delta negative. So, a short bull spread is a similar bet compared with a
long bear spread, except that money goes out at the beginning.
aining values

as a percentage.
ces (say, 45
n.
all at the
call at the
s
pared with a
0.4008
1st Exercise Price
2nd Exercise Price
T-bill rate
Time remaining
Standard Deviation
$46.0000
$45.0000
$50.0000

Value of Put at 1st exercise price:
Value of Call at 2nd exercise price:
$1.1211
$0.6584
Value of Collar:
$46.4627
d(1)
d(2)
N(d1)
N(d2)
$44.45
$49.39
0.3951073536 -0.66578928
0.2957946469 -0.76510198
0.6536
0.2528
0.6163
0.2221
This worksheet calculates the value of a Collara using the Black/Scholes

model.
A Collar is made from calls and puts with two different exercise prices (say, 45 & 50).
Both of the options have the same underlying and the same expiration.
A long collar is long the underlying, long one put at the lower exercise price and short
one call at the higher exercise price. Thus the holder owns the underlying asset, but has
locked in a minimum value and has accepted a maximum value.
A collar is similar to a bull money spread because (by put-call parity) a collar equals a
risk-free bond with face value of the lower exercise price, plus a long bull spread ( the
bull spread is long a call at the lower exercise price and a short call at the higher
exercise price). So, the delta for a collar is the same as the delta for a bull money
spread.
aining values

as a percentage.
oles
5 & 50).
nd short
set, but has
equals a
ead ( the
her
oney
0.4008
1st Exercise Price
2nd Exercise Price
T-bill rate
Time remaining
Standard Deviation
$46.0000
$45.0000
$50.0000

Value of 1st Put:
Value of 2nd Put:
$1.1211
$4.0457
Value of Bear Money Spread:
$2.9246
d(1)
d(2)
N(d1)
N(d2)
$44.45
$49.39
0.3951073536 -0.66578928
0.2957946469 -0.76510198
0.6536
0.2528
0.6163
0.2221
This worksheet calculates the value of a Bear Money Spread using the
A Bear Money Spread is made from put options with two different exercise prices (say,
45 & 50). Both of the options have the same underlying and the same expiration.
A long bear spread is long one put at the higher exercise price and short one put at the
lower exercise price. The delta for a long bear spread is the negative of the delta for a
long bull spread.
A short bear spread is short one put at the higher exercise price and long one put at the
lower exercise price. Going short provides an inflow at the time the spread is
established, with delta positive. So, a short bear spread is a similar bet compared with a
long bull spread, except that money comes in at the beginning as well as (possibly) at
the end. The delta for a short bear spread is the same as the delta for a long bull
spread.
aining values

as a percentage.
he
ices (say,
ation.
put at the
delta for a
e put at the
pared with a
ssibly) at
bull
-0.4008
1st Exercise Price
T-bill rate
Shorter Time remaining
Longer Time remaining
Standard Deviation
$45.6000
$45.0000
5.0000%
0.1644
0.2466
20.0000%
Enter
Enter
Enter
Enter
the continuously compounded annual rate as a decimal fraction. The value

time in years. This value may be a fraction, such as 30/365 (type the follo
as decimal fraction. The value is displayed as a percentage.

Value of 1st Call:
Value of 2nd Call:
$1.9940
$2.4176
Value of Calendar Spread:
$0.4235
d(1)
d(2)
N(d1)
N(d2)
$44.63
$44.45
0.3052477296 0.30716614
0.2241592442 0.207853433
0.6199
0.6206
0.5887
0.5823
This worksheet calculates the value of a Calendar Spread using the

A Calendar Spread is made from call options with two different expiration dates (say, 60
days & 90 days). Both of the options have the same underlying and the same exercise
price.
A long calendar spread is long one call at the longer time and short one call at the lesser
time. It's delta is positive when the options are out-of-the-money, and turns negative
soon after the options move into the money. The value of the calendar spread is highest
when the options are near the money.
A short calendar spread is short one call at the longer time and long one call at the
lesser time. It's delta follows the opposite scenario compared with the long spread.
aining values

as a percentage.
es (say, 60
e exercise
at the lesser
negative
d is highest
at the
pread.
0.0007
1st Exercise Price
2nd Exercise Price
T-bill rate for shorter time
T-bill rate for longer time
Shorter Time remaining
Longer Time remaining
Standard Deviation
$165.1250
$165.0000
$170.0000
5.0300%
5.7100%
0.0877
0.2603
21.0000%
Enter
Enter
Enter
Enter
Enter


Value of 1st Call:
Value of 2nd Call:
$8.3533
$2.4056
Value of Calendar Spread:
$5.9477
d(1)
d(2)
N(d1)
N(d2)
$162.57
$169.25
0.1993541981 -0.36591847
0.0922183862 -0.42809806
0.5790
0.3572
0.5367
0.3343
This worksheet calculates the value of a Diagonal Spread using the

Sometimes option traders use a combination of a money spread and a calendar spread
called a diagonal spread. This transaction involves the purchase of a call with a lower
exercise price and a longer time to expiration combined with the sale of a call with a
higher exercise price and a shorter time to expiration.
aining values

as a percentage.
dar spread
h a lower
l with a
0.2218
1st Exercise Price
2nd Exercise Price
3rd Exercise Price
T-bill rate
Time remaining
Standard Deviation
$55.0000
$50.0000
$55.0000
$60.0000

Value of 1st Call:
Value of 2nd Call:
Value of 3rd Call:
$5.0693
$0.7641
$0.0029
Value of Butterfly Spread:
$3.5440
d(1)
d(2)
N(d1)
N(d2)
$49.93
$54.92
$59.92
2.937025623 0.057932412 -2.57047376
2.9039213875 0.024828177 -2.60357799
0.9983
0.5231
0.0051
0.9982
0.5099
0.0046
This worksheet calculates the value of a Butterfly Spread using the

A Butterfly Spread is made from call options with three different exercise prices, usually
spead at equal intervals (say, 45, 50, 55). All of the options have the same underlying
and the same expiration.
A long butterfly is long one call at the lowest exercise price, short two calls at the middle
exercise price, and long one call at the highest exercise price.
When the stock is below the 1st exercise price, delta is positive. As the stock rises from
there, the value of the butterfly increases, and the delta rises.
When the stock price rises near to the 2nd exercise price, the delta turns negative. As
the stock rises from there, the value of the butterfly decreases, and the delta moves
toward zero.
The value of the butterfly is highest when the stock price is slightly below the 2nd
exercise price.
aining values

as a percentage.
-0.0428
1st Exercise Price
2nd Exercise Price
3rd Exercise Price
4th Exercise Price
T-bill rate
Time remaining
Standard Deviation
$52.0000
$45.0000
$50.0000
$55.0000
$60.0000

Value of 1st
Value of 2nd
Value of 3rd
Value of 4th
Call:
Call:
Call:
Call:
$7.6676
$3.5782
$1.1434
$0.2420
Value of Condor Spread:
$3.1880
d(1)
d(2)
N(d1)
N(d2)
$44.45
$49.39
$54.33
$59.26
1.6296152655 0.568718637
-0.3909791 -1.26711449
1.5303025588 0.46940593 -0.49029181
-1.3664272
0.9484
0.7152
0.3479
0.1026
0.9370
0.6806
0.3120
0.0859
This worksheet calculates the value of a Condor Spread using the

A Condor Spread is a butterfly with extended wingspan (done by inserting a gap
between the exercise prices of the two short calls). It is made from call options with four
different exercise prices (say, 45, 50, 55, 60). All of the options have the same
underlying and the same expiration.
A long condor is long one call at the lowest exercise price, short a call at each of the
next two larger exercise prices, and long one call at the highest exercise price (say, long
the 45, short the 50, short the 55, and long the 60).
In terms of delta, a condor is similar to a strangle.
aining values

as a percentage.
gap
ns with four
me
h of the
e (say, long
-0.0122
xercise Price for calls used as gamma hedge
Exercise Price for calls used as delta hedge
T-bill rate
e remaining for calls used as gamma hedge
Time remaining for calls used as delta hedge
Standard Deviation
Shares of the underlying to be hedged
$50.0000
$50.0000
$45.0000
5.0000%
0.0274
0.1644
20.0000%
1,000
Enter
Enter
Enter
Enter
Enter
the continuously compounded annual rate as a decimal

time in years. This value may be a fraction, such as 30/
time in years. This value may be a fraction, such as 30/
as decimal fraction. The value is displayed as a percent
the number of shares held. Positive sign indicates long,

Value of 1st Call:
Value of 2nd Call:
$0.6946
$5.5085
Value of total position:
$43,634.12
d(1)
d(2)
N(d1)
N(d2)
Delta of 1st
Delta of 2nd
Gamma of 1st
Gamma of 2nd
option
option
option
option
$49.93
$44.63
0.0579324122 1.441232555
0.0248281767 1.360144069
0.5231
0.9252
0.5099
0.9131
This worksheet calculates the hedge ratios for a delta and gama neutral hedge, using the
A delta and gamma neutral hedge uses two options to hedge the risks of a position in the underlying. The
two options have the same underlying but different exercise prices or expiration dates.
Since gamma is greatest for calls that are near the money with a short time remaining until expiration,
such options can be useful tools in the gamma portion of the hedge.
Since delta is greatest for in-the-money options, such options can be useful tools in the delta portion of the
hedge.
The spreadsheet calculates the number of options necessary to complete the hedge (rounded to nearest
whole number). It also shows the value of the total position, from which you can see that the hedge is not
perfect (the value does fluctuate as the value of the underlying changes). Even so, the fluctuations are
very much more gentle than with an unhedged position in the underlying.
ng values

e is displayed as a percentage.
ositive sign indicates long, negative sign indicates short
he worksheet:
Delta of 1st
Delta of 2nd
Gamma of 1st
Gamma of 2nd
option
option
option
option
0.5231
0.9252
0.2406
0.0348
170 Number of calls for gamma portion of the hedge

-1,177 Number of calls to complete the delta portion of the hedge
0 Delta of hedge
0 Gamma of hedge
hedge, using the
on in the underlying. The

dates.
aining until expiration,

in the delta portion of the
dge (rounded to nearest

see that the hedge is not
so, the fluctuations are
Exercise Price
T-bill rate
Time remaining
Standard Deviation
Dividend yield
"Shares" of the Index
Futures multiplier
$1,224.3600
$1,210.0000
5.0000%
0.2466
17.5000%
Enter
Enter
Enter
Enter
Enter
today's value of the equity index that best fits the portfolio you wis
the floor value of the equity index that you wish to set as the insur
the continuously compounded annual rate as a decimal fraction. T
time in years. This value may be a fraction, such as 30/365 (type
3.00% Enter the dividend yield of the index as a decimal fraction

21,000.00 Enter the number of "shares" in the index your portfolio contains (this is
250 Enter this value if you want to calculate a portfolio insurance strategy us

$53.0133
0.5778
$32.7009
PV of Bonds (adjusted for dividends)

d(1)
d(2)
N(d1)
N(d2)
$1,204.05
0.2359656697
0.1490670514
0.5933
0.5592
20,453.71
Shares of equity in the Insured Portfolio

Number of Bonds in the Insured Portfolio
12134.58
9014.98
$14,857,094.62
$10,854,465.38
Number of index futures contracts
-35.29
$25,711,560.00
$24,748,990.34
This worksheet calculates the proportions for establishing portfolio insurance strategies
Portfolio insurance is a dynamic strategy and requires frequent revision to keep up with changing equity values. Th
thing that remains constant through the life of the insurance coverage. You choose this time horizon as part of the
for the initial setup of the portfolio insurance strategy, not for revision of an established strategy. The option mode
dividends.
Through portfolio insurance, the investor creates portfolios with revised proportions of equity and bonds, creating a
portfolio against loss. The revised portfolio responds to changes in the equity value the same way a portfolio of eq
An alternative is to use futures contracts on the equity index in order to alter the response of the insured portfolio s
value the same way a portfolio of equity and puts would respond. The equity position remains unchanged, but the
the insured portfolio toward the target level. The shortcoming is the lack of precision because fractional contracts a
aining values
at best fits the portfolio you wish to insure

hat you wish to set as the insured level
al rate as a decimal fraction. The value is displayed as a percentage.
fraction, such as 30/365 (type the following: =30/365).
splayed as a percentage.
decimal fraction
your portfolio contains (this is the total value of the portfolio divided by the level of the index on the first day of portfolio insurance)
portfolio insurance strategy using futures contracts on the equity index
Delta of the insured portfolio
Proportions
Number of shares plus puts in the insured portfolio
Amount held in equity

Amount held in bonds
Total value of portfolio today
Floor value of insured portfolio
nce strategies
with changing equity values. The time remaining until expiration is the only
this time horizon as part of the initial strategy. This worksheet helps only
hed strategy. The option models in this worksheet are adjusted for
of equity and bonds, creating a synthetic put option that protects the
the same way a portfolio of equity and puts would respond.
ponse of the insured portfolio so that it responds to changes in the equity

n remains unchanged, but the short futures position brings the delta of
n because fractional contracts are not available.
2
42%
1
58%
t day of portfolio insurance)
8%
The user enters blue-font values in column B. The software transfers red-font data from the p
Exercise Price
T-bill rate
Time remaining
Standard Deviation
Dividend yield
"Shares" of the Index
Futures multiplier
$1,224.3600
$1,210.0000
5.0000%
0.2466
17.5000%
Enter
Enter
Enter
Enter
Enter
today's value of the equity index that best fits the portfolio you wis
the floor value of the equity index that you wish to set as the insur
the continuously compounded annual rate as a decimal fraction. T
time in years. This value may be a fraction, such as 30/365 (type
3.00% Enter the dividend yield of the index as a decimal fraction

20,453.71 Number of shares plus puts in the insured portfolio
250 Enter this value if you want to calculate a portfolio insurance strategy us

$53.0133
0.5778
$32.7009
PV of Bonds (adjusted for dividends)

d(1)
d(2)
N(d1)
N(d2)
$1,204.05
0.2359656697
0.1490670514
0.5933
0.5592
Shares of equity in the Insured Portfolio

Number of Bonds in the Insured Portfolio
12134.58
9014.98
$14,857,094.62
$10,854,465.38
Number of index futures contracts
-35.29
$25,711,560.00
$24,748,990.34
This worksheet calculates the proportions for establishing portfolio insurance strategies
Portfolio insurance is a dynamic strategy and requires frequent revision to keep up with changing equity values. Th
thing that remains constant through the life of the insurance coverage. You choose this time horizon as part of the
for the initial setup of the portfolio insurance strategy, not for revision of an established strategy. The option mode
dividends.
Through portfolio insurance, the investor creates portfolios with revised proportions of equity and bonds, creating a
portfolio against loss. The revised portfolio responds to changes in the equity value the same way a portfolio of eq
An alternative is to use futures contracts on the equity index in order to alter the response of the insured portfolio s
value the same way a portfolio of equity and puts would respond. The equity position remains unchanged, but the
the insured portfolio toward the target level. The shortcoming is the lack of precision because fractional contracts a
red-font data from the previous worksheet.
at best fits the portfolio you wish to insure

hat you wish to set as the insured level
al rate as a decimal fraction. The value is displayed as a percentage.
fraction, such as 30/365 (type the following: =30/365).
splayed as a percentage.
decimal fraction
portfolio insurance strategy using futures contracts on the equity index
Delta of the insured portfolio
Amount held in equity

Amount held in bonds
Total value of portfolio today
Floor value of insured portfolio
nce strategies
with changing equity values. The time remaining until expiration is the only
this time horizon as part of the initial strategy. This worksheet helps only
hed strategy. The option models in this worksheet are adjusted for
of equity and bonds, creating a synthetic put option that protects the
the same way a portfolio of equity and puts would respond.
ponse of the insured portfolio so that it responds to changes in the equity

n remains unchanged, but the short futures position brings the delta of
n because fractional contracts are not available.
Proportions
2
42%
1
58%
8%
Exercise Price
T-bill rate
Time remaining
Standard Deviation
$100.0000
$90.0000

Value of European Call:
$11.0170
Value of European Put:
$0.2803
Asset-or-Nothing Option:
Cash-or-Nothing Option:
$92.5241
$0.9056
d(1)
d(2)
N(d1)
N(d2)
$89.26
1.4412325546
1.3601440692
0.9252
0.9131
Delta
Gamma
Rho
Theta
Vega
This worksheet calculates the value of digital options using the Black/Scholes
model.
In the case of an asset-or-nothing option, the holder recieves the underlying asset if its
value at expiration exceeds the exercise price stated in the contract. The holder pays
nothing at exercise. The holder receives nothing if the option expires out-of-the-money.
In the case of an cash-or-nothing option, the holder recieves $1 if the value of the
underlying asset at expiration exceeds the exercise price stated in the contract. The
holder receives nothing if the option expires out-of-the-money.
So, a European Call equals one asset-or-nothing option minus X cash-or-nothing options
(where X is the exercise price).
aining values

as a percentage.
k/Scholes
asset if its
lder pays
the-money.
of the
act. The
ng options
0.9252
0.0174
13.3984
-7.5582
5.7252

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The user enters values in column B.

The worksheet calculates the remaining values

The following values are computed by the worksheet:

Value of Put Option:

s a decimal fraction. The value is displayed as a percentage.

The following values are computed by the worksheet:

23.4674% Press the ""Calculate ISD" button

Model Value of Call Option:

Model Value of Put Option:

annual rate as a decimal fraction. The value is displayed as a percentage.

options using the

he exercise price stated in

cise price, the market

not match the "Revised

won't function. You can

The following values are computed by the worksheet:

33.4423% Press the ""Calculate ISD" button

Model Value of Call Option:

Model Value of Put Option:

annual rate as a decimal fraction. The value is displayed as a percentage.

options using the

he exercise price stated in

cise price, the market

won't function. You can

time in years. This value may be a fraction, suc

The following values are computed by the worksheet:

Value of Put Option:

Variance of the Price Ratio, Asset1/Asset2

This value may be a fraction, such as 30/365 (type =30/365).

puted by the worksheet:

e asset for another.

rder to receive the first asset.

e the second asset.

The following values are computed by the worksheet:

Value of Covered Call position:

Delta of covered call position:

s a decimal fraction. The value is displayed as a percentage.

The following values are computed by the worksheet:

Value of Protective Put position:

Delta of protective put position:

s a decimal fraction. The value is displayed as a percentage.

The following values are computed by the worksheet:

Delta for the straddle

This worksheet calculates the value of a Straddle using the Black/Scholes

s a decimal fraction. The value is displayed as a percentage.

The following values are computed by the worksheet:

Delta for the strap

s a decimal fraction. The value is displayed as a percentage.

The following values are computed by the worksheet:

Delta for the strap

s a decimal fraction. The value is displayed as a percentage.

The following values are computed by the worksheet:

Delta for the spread

This worksheet calculates the value of a Strangle using the Black/Scholes

s a decimal fraction. The value is displayed as a percentage.

The following values are computed by the worksheet:

Value of Bull Money Spread:

Delta for the spread

s a decimal fraction. The value is displayed as a percentage.

The following values are computed by the worksheet:

Delta for the spread

This worksheet calculates the value of a Collara using the Black/Scholes

s a decimal fraction. The value is displayed as a percentage.

The following values are computed by the worksheet: