The Theoretical View is a view of the Calls and Puts Option Chains. It allows you to select a Greek model and make changes to the different parameters that affect option pricing as calculated in that model in order to see how those changes would affect the prices and Greeks of the options in that chain.
To reset the inputs back to their defaults or current values, press the Reset button.
| Inputs | |
|---|---|
| Greek Model | The Greek models available in other areas of the application are also available here. Choose between Black-Scholes, Barone-Adesi-Whaley, and Cox-Ross Rubenstein. |
| Price Chg | Allows you to enter a change amount for the stock price used in the Greek model, as a positive or negative number. If you would like to see how the model predicts values if the stock is up 5 points, enter 5. If you would like to see how the model reacts if the stock is down 5 points, enter -5. Prices can be entered to two decimal places. |
| Days Past | Enter the number of days to pass. This value will apply to the whole chain, so if you enter 3 days past, the model will predict the value for each option as if 3 days have elapsed. |
| IV Chg | Enter the amount of the Implied Volatility change in the stock. If you want to see how the model reacts if the IV changes by 10% or -10%, enter 10 or -10 in the IV Chg input. |
| % Int | This represents the risk free interest rate used in the calculations, and defaults to the current $IRX (CBOE 13 week treasury bill index. The $IRX value is divided by 10 to be expressed as an interest rate %) |
| Div Yield |
This Input assumes a continuous dividend over the life of the options being priced, so a 5% yield would assume an annual dividend of 5% that would pay daily. It defaults to the actual dividend yield paid over the last year for that stock. TIP: If you are not expecting a dividend payment during the life of the option, you can set this to 0. |
| Output Columns | |
|---|---|
| Theo Value | Shows the theoretical value of the option as a result of the changes to the inputs. This could be thought of as a theoretical Midpoint price. |
| Theo Delta | Shows the Delta after the input changes are taken into account. This represents the expected change in value for that option for the next 1 point change in the Underlying price, based on the values calculated. |
| Theo Gamma | Shows the Gamma after the input changes are taken into account. This represents the expected change in Delta for the next 1 point change in underlying value |
| Theo Rho | Shows the Rho after the input changes are taken into account. This represents the change in option value for the next 1 point change in interest rates. |
| Theo Theta | Shows the Theta after the input changes are taken into account. This represents the change in option value for the next day passing. |
| Theo Vega | Shows the Vega after the input changes are taken into account. This represents the change in option value for the next point increase in Implied Volatility. |
| Theo IV | This shows the Implied Volatility for each option as it is used in the calculations. It takes the IV Chg amount and adds or subtracts from the current IV value. |
| Theo Chg |
Shows the difference between the Theoretical Value and the current Midpoint. |
| Quote Data | |
|---|---|
| Strike | Option strike price; the price at which the owner of an option can purchase (call) or sell (put) the underlying security |
| Symbol | Stock, option, or index symbol |
| Last Trade | Price of last trade |
| Change | Change from Previous Close to Last Trade |
| Bid | Current inside Bid price |
| Ask | Current inside Ask price |
| Midpoint | Midpoint between Bid and Ask |
| Volume | Number of shares/contracts the security has traded for the day |
| Bid Size | The quoted size of the inside bid price |
| Ask Size | The quoted size of the inside ask price |
| Open Int | Open Interest is the total number of outstanding options contracts that have not yet been closed |
| % Change | Percent change from Previous Close to Last Trade |
| Last Size | Size of last trade |
| Last Time | Time of last trade |
| Chg (Open) | Change from Open to Last Trade |
| % Chg (Open) | Percentage change from Open to Last Trade |
| Open | Opening price for the day |
| High | Highest price the security has traded at for the day |
| Low | Lowest price the security has traded at for the day |
| Prev Close | Closing price from previous market session |
| Ending Ask | Ending Ask price of the market session |
| Ending Bid | Ending Bid price of the market session |
| Ending Mid | Ending Midpoint price of the market session |
| Intrinsic Value | The value by which the option is in the money, calculated for calls as (underlying price – strike price), or for puts as (strike price-underlying price) |
| Time Value | The value of the option that is not attributed to the intrinsic value, calculated as (Midpoint - Intrinsic Value) |
| Greeks | |
|---|---|
| IV |
Implied Volatility based on the option midpoint price and underlying price as calculated with selected option pricing model. IV is a theoretical value (in %) designed to represent the forecasted volatility of the security or index as determined by the prices of multiple call and put options using the Black-Scholes pricing model. Other variables usually include security price, strike price, risk-free rate of return, and days to expiration. If all other variables are equal, the security with the highest volatility will generally have the highest option prices. |
| IV Ask | Implied Volatility based on the option ask price and underlying price as calculated with selected option pricing model. |
| IV Bid | Implied Volatility based on the option bid price and underlying price as calculated with selected option pricing model. |
| Delta | Estimate of the change in option price per one point change in the underlying price based on the selected option pricing model. |
| Gamma | Measures the change in delta for a change in the underlying security price |
| Theta | Estimate of the change in option price per one day passing based on selected option pricing model. |
| Vega | Estimate of the change in option price per a 1% change in volatility of the underlying based on selected option pricing model. |
| Rho | Estimate of the change in option price per a 1% change in interest rates based on selected option pricing model. |
Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Multiple leg options strategies will involve multiple commissions. Please read the options disclosure document titled "Characteristics and Risks of Standardized Options." Supporting documentation for any claims or statistical information is available upon request.