For FAQs relating specifically the Finance Add-in for Excel and associated applications, see Add-in FAQs. What will it run on, and how do I install it? What are the Premium Features and how do I get them? Why do I get "invalid page fault", "compile error in hidden module", "run time error 91", "illegal operation", or other strange errors?

Why doesn't the tool fit my screen? How do I use the tool? Why does the software ask for a password when I try to change, eg, volatility? I'm using Excel or later. Should I save OSET as an Excel or later file? Which pricing methodology should I use? How can I use the tool for options on currencies, stock indices and futures? How can I identify optimal early exercise points?

Why is the pay-off line for the maximum profit for covered calls with continuous dividends not quite horizontal? Why is there a separate asset type for futures contracts? How can I learn more about options? See Finance Add-in for Excel system requirements. Download the file from this web site and double click to install. It is strongly recommended that, following installation you copy the OSET file OptionStrategy Mk3. That will prevent the file showing as "read only" in Windows Vista or later see Why does OSET show as "read only?

Why does OSET show as "read only"? Why can't I save OSET? If OSET shows as "read only" in the Excel title bar -- and you therefore can't save OSET -- then that's caused by your Windows security settings. In Windows Vista or later, files installed into the Program Files directory which is where OSET is installed by default are treated as "read only" unless you have your User Account Control UAC in Windows on its lowest setting. The solution to this "issue" is not to change your Windows security settings, but simply to copy the OSET file itself OptionStrategy Mk3.

Make sure this folder is a trusted location in versions of Excel or later. You do that by adding the folder to Trusted Locations in Excel's Trust Center. You will then be able to use and save your files as normal. W hat are the Premium Features and how do I get them? The premium features are a range of features which greatly increase the power of the Options Strategy Evaluation Tool OSET.

See premium features for details. To enable the premium features in OSET, simply purchase and install the Hoadley Finance Add-in for Excel from this web site. No other action is required.

STT Trap – Options Expiry – NSE BSE MCX-SX « Z-Connect by Zerodha

OSET will automatically detect that you have installed the add-in and the premium features will immediately be available for you to use. For a summary of OSET premium features, click here. By far the most common reason is that you haven't installed the application correctly. Other reasons can range from corrupt or incorrectly installed versions of Excel to Windows corruptions.

Please investigate these possibilities thoroughly yourself before asking for help. Whilst it is conceivable there is a problem with the software that hasn't shown up after many thousands of installations, it is, to be blunt and direct, far, far more likely that you have screwed up the installation eg copied the strategy spreadsheet to another PC without installing it firstor your PC configuration is faulty.

If all else fails, please contact Peter Hoadley for help. The Options Strategy Evaluation Tool when you first download it is set to use a graphics card of x resolution. If your PC has another graphics resolution, then adjust the zoom factor by selecting the appropriate graphics resolution from the combo box under the "Underlying assets, settings" tab. This will automatically scale each page of the tool to fit your screen.

Then save the tool. Note that the tool is optimised for resolutions of x and above. Whilst it will run correctly on a screen resolution of x some of the text labels in combo boxes and other places is pretty hard to read at this resolution. For an overview of the main features of the tool it is recommended that you take the seven minute on-line guided tour. To use the tool you first set up your stock parameters stock code, volatility and any dividends due under the "Underlying assets, settings" tab.

For most short-term stock options it's better to specify discrete dividend payments if possible; continuous dividends are more useful for longer term stock options and are an absolute requirement for options on currencies, stock indices and futures contracts. An annual volatility must also be specified for each stock.

You also need to specify the risk free interest rate under the "Underlying assets, settings" tab. You will see I have already set up a few stock codes including "SAMPL" which is the stock code used for the sample strategies. Just change these or add new codes for your own stocks. Next, go to the " strategy evaluation" tab and set up a deal for a particular stock code by filling in the blanks ie the bits highlighted in yellow.

The stock code is entered at the top left hand corner of the tool and must have been previously set up on the "Underlying assets, settings" tab. A deal may consist of up to ten option trades and two stock trades. For each options trade you must specify four items: The tool will then automatically calculate the option price for each options trade using the specified calculation mode Black-Scholes, or Binomial.

In addition to the above four items which must specified for each options trade you can also enter any or all of the following optional items for any or all of the individual option trades:. However, to fine-tune the tool you can specify an implied volatility separately for each option trade to handle the "volatility smile" associated with the underlying asset stock.

An implied volatility calculator is supplied as part of the tool to help you estimate the implied volatility based on market prices.

You only need to enter the expiration date for each trade if it is different from the deal expiration date eg for a calendar spread. Leave it blank and the tool will use the deal expiration date. If you want to override the option price calculated by the tool then enter a price here. You might want to do this, for example, when you have been quoted a specific price for an option, or you are looking at the forward profit profile for an option previously bought or written.

Another reason to do this is to get the tool to calculate the implied volatility. In this case after entering an override price, click on the "calculate implied volatility" button for the trade and the implied volatility will be calculated. The easiest way to see how to fill in the yellow bits is to retrieve one of the sample saved strategies and have a look at what's going on.

Then press "cycle through time to expiration" to see how the time line changes as you get closer to expiration. To compare two strategiespress "copy strategy to comparison area". This creates a copy of the strategy in another area the "strategy comparison area". Then press "switch to comparison area" to view this and to change any part of the copied strategy.

The copied strategy and the original strategy will both be visible on the same pay-off diagram. For more detailed analysis press the "Show Greeks" button. This will let you view the " Greeks " delta, gamma, theta, vega, rho and profit figures for each trade in the strategy separately, or for the net position ie the entire strategy graphically.

At any time you can change the calculation model Black-Scholes European; binomial-American; binomial-European by selecting the appropriate model from a combo box on the main evaluation page.

A different calculation model can be specified for the "strategy comparison area" thereby enabling those of a theoretical leaning to see the significance of different pricing models for deal profitability on the one pay-off diagram. As well as viewing the profit results on pay-off diagrams, you can look at them in tabular form by pressing the 'switch to table' view button.

See the on-line tutorials for a set of auto-demos which cover all the key features of the software. Finally, just play around with it -- you'll soon figure it out. The only fields that can be changed on the 'strategy evaluation' sheet are those highlighted in yellow. Once you set up or change the information here it will be automatically used by the 'strategy evaluation' sheet.

This is described above.

The reason it is designed this way is so that information which usually applies to all strategiessuch as the risk free work from home content writing jobs in mumbai rate, or information which usually applies to all options for a given underlying asset, such as volatility and dividends, need only be changed in one place.

To stop people accidentally overwriting formulas which are used by the software the parts of the tool which you do not have to change are protected. If Excel tells you a password is required then it means you are trying to update information which should be updated elsewhere. Never change the file format of any spreadsheet downloaded from this web site.

The Options Strategy Evaluation Tool OSET is an Excel Forex open market rates pakistan XLS -- ie compatibility mode. With this format OSET will run under versions of Excel or later. If you use "save as" to change the file type to the newer Excel format eg XLSM nothing will work correctly under any version of Excel.

This applies to all the Excel applications available from this site Historic Volatility Calculator, Implied Volatility Calculator etc. Sometimes when you hit "save" under Excel or later you will receive an Excel message asking if you want to save the document in the "Office Open XML Format". Always click the "No" button.

There is no reason whatsoever to change the file format and contrary to what many people think, simply saving a spreadsheet in the new Excel format will usually result in errors for all but the simplest of spreadsheets.

Which one should I use? The tool lets you choose the way options are priced:. Most exchange cost basis for exercised call options equity options are American options ie they can be exercised at any time before the expiration date so you should select binomial Maplestory make mesos fast for equity options.

This is because, assuming no arbitrage opportunities ie the call is fairly priced and ignoring transaction costs there is never any rational reason to exercise a call early. Also prior to ex-dividend dates, European calls may be worth less than their intrinsic value -- and this can't happen for American calls. The situation is quite different for puts and even on non-dividend paying stocks the fair value of a deeply in the money European put can be less than its intrinsic value due to the carrying costs on the positions which arbitrageurs undertaking conversions would have to carry through to expiration.

American puts, on the other hand, cannot trade at a discount to parity as they would be quickly exercised by arbitrageurs. It may also be optimal to exercise a deeply in the money put early -- an obvious example would be if the stock price fell to zero because the company went bankrupt. In this case there would definitely be nothing to gain and in fact something to lose by waiting until expiration.

Other less extreme cases could also justify early exercise. Once again, only the binomial American model handles this correctly. To identify optimal early exercise thresholds for American options you can use the Option Strategy Evaluation Tool's early exercise report. For more information on the approach to pricing see the section on Option Pricing Models. How can I use the tool for options on currencies, stock indices, and futures? These options can be handled by the tool, in a theoretically correct way using continuous dividend yields, as follows:.

Options on foreign currencies: Set the continuous dividend yield for the currency option equal to the foreign risk-free rate. This is because holding foreign currency, which will pay you interest in the foreign currency at the foreign risk free rate which is continuously reinvested in the foreign currency, is analogous to holding stock paying a stratégie de trading sur le forex dividend which is reinvested in additional units of the stock.

So options on both these underlying assets are handled in the same way. See the example and additional explanation for FOREX options below. Options on stock indices: Set the continuous dividend yield for the index option equal to the average dividend yield on the stocks in the index. The pricing of options on futures can be correctly handled by setting the continuous dividend yield for the option on the futures contract equal to the risk-free rate and replacing the spot price with the current futures price.

However, calculating strategy profitability as opposed to simple option pricing can be tricky. To simplify this process, the Options Strategy Evaluation Tool lets you specify the underlying asset type as a futures contract, in which case it will automatically handle the pricing ie no need to specify a dividend yield plus it will take into account the impact on profitability of holding positions in a futures contract vs the how much money does a realtor make asset itself.

See Why is there a separate asset type for futures contracts for details. You can then select European or American pricing see FAQ on pricing models below in the normal way. Foreign currency option FOREX example: You are in the United States of America and want to buy a put option in US Dollars USD over Japanese Yen JPYperhaps to stock brokers with dividend reinvestment investments you are teknik zigzag forex in JPY against a strengthening USD.

Exercise (options) - Wikipedia

The strike would be expressed in terms of the cost of JPY in USD eg. Note that by definition you are, by buying the put on JPY, also buying a call on USD because your right to sell one currency is also the right to buy the other. To identify optimal early exercise points you go to the 'Early Exercise' worksheet and run the report. All options which must be American-style exercise will be searched for optimal early exercise points.

This information is valuable both to option holders and option writers. If you are a holder and either exercise too early or continue to hold beyond the optimal exercise date then you are not maximising your profit potential; if you are an options writer then you need to be able to anticipate the risk of early exercise so you binary option fund take evasive action in advance of this happening.

Note that American options can be exercised at any time prior to maturity -- an option holder is not obliged to act rationally and thus financially unsound early exercise 'decisions' are sometimes made: When is it optimal for an option to be exercised?

The following is a brief summary of the rules followed by the Options Strategy Evaluation Tool:. Note that it is never optimal to exercise a call just to collect the dividend as the price of the underlying asset can be expected to fall by the amount of the dividend on the ex-dividend date where 'dividend' in this context is the cash dividend adjusted for any tax impacts, such as imputation credits.

You would only exercise a call and carry neopets stock market cheat underlying asset as an alternative to holding how to make money origami cat option, not simply as a way of collecting the dividend. The lower the risk free interest rate the earnforex in the money and the closer to expiration the put will have to be to reach the early exercise threshold.

If there are one or more discrete dividends payable on the underlying stock during the period of the option then it would not normally be optimal to exercise the option before the last ex-dividend date.

It is often optimal to exercise a put exactly on the last ex-dividend date. Will an early exercise decision always turn out to be correct? If, after exercise and on or before the option maturity date the underlying asset price moves so that the option, had you held it, would be out of the money then you could be worse off having exercised early.

Theoretically it is always better financially for an option holder to sell the option in the secondary market and then to buy or sell the underlying asset at market price if required rather than exercising when there is time value premium remaining on the option. Actually, it should be horizontal if your call really is covered. The problem is that you probably haven't set up your covered call using the correct number of units ie shares in the underlying asset.

The continuous dividend yield model is based on the a dividend yield specified as a percentage of the current underlying asset price. Hedging and covering options paying a continuous dividend yield require that you adopt a dividend reinvestment model. Luckily, under the dividend reinvestment model, the number of additional units purchased is independent of the spot price as when the spot price is high the dividend is larger but buys less units, and vice versa.

The Options Strategy Evaluation Tool includes dividends received on underlying assets in the profit calculation. With assets paying a continuous dividend yield, the higher the value of the underlying asset at expiration the higher the value of the dividends received ie constant units reinvested multiplied by the stock price at expiration.

So in the absence of any adjustment to the initial number of shares purchased this produces a covered call pay-off diagram with the maximum profit line sloping gently upwards -- ie you don't really have a covered call.

In other words, because the "dividends" are being continuously reinvested like compounding interest, the number of units in the underlying asset you end up holding at expiry will be greater than at the start.

So as a result you need to buy less units at the start to end up exactly covering your call at expiry. This applies to any asset where "dividends" are being continuously reinvested in additional units of the underlying, such as a holding in a foreign currency. Note that stocks are not like this -- they pay dividends in discrete amounts -- so strictly speaking you should be modelling stocks using discrete dividends rather than continuous.

You can actually key this formula directly into the "no. If you do this you will find your covered European call suddenly looks completely normal again, with a perfectly horizontal maximum pay-off line. This is the way pay-off diagrams are normally shown. For example, if you wrote a naked put then the fact that you had the use of the proceeds for the duration of the option and could have invested these funds and earned additional revenue is not normally taken into account.

In the case of dividends the calculations take into account the timing of the dividends. The funding costs are included in both the profit at expiration and in the calculation of the profit at time now line. All funding calculations are made on a continuously compounded basis using the risk free interest rate. The application of funding costs is covered in the following on-line tutorials: Guided tour - the sample strategies, "what if" scenario analysis, and Dividends. There are some significant differences between options on a futures contract "futures options" and options on the underlying asset itself "spot options".

There is no cost associated with entering into a futures contract so there are no carrying costs -- unlike a position in the underlying asset itself. To calculate the profit or loss of closing a strategy which includes a position in a futures contract expiring at the same time as the options it is necessary to calculate the current value of the futures contract, which equals the present value of the difference between the current futures price and the delivery price.

These differences can be important. If you just treat strategies on futures contracts as if they were strategies on the underlying assets themselves the results can be quite misleading. You may think you have spotted a great arbitrage opportunity when, in reality, none exists.

The Options Strategy Evaluation Tool takes these differences into account when calculating option prices and strategy profit or loss. You simply tell the tool, on the underlying asset sheet, whether or not the underlying is a futures contract and the necessary adjustments will be made automatically. Understanding Options Trading and Understanding Options Strategies. Booklets published by the Australian Stock Exchange. Good introductions for those new to options. ASX derivatives web site.

Options as a Strategic Investment by Lawrence G. Comprehensive coverage of the most popular option strategies. Black-Scholes and Beyond by Neil A. Chriss published by McGraw-Hill. Good coverage of the main option pricing theories. Mathematics of option pricing dealt with intuitively rather than rigorously wherever possible. Hull 6th Edition, published by Prentice-Hall. Very strong on the fundamentals of of derivatives valuation. Includes a good chapter on historical volatility including GARCH, and another excellent introduction to Value at Risk VaR.

Mathematically oriented but can still be of great value to readers with limited mathematical knowledge. In depth coverage of most popular historic volatility models.

Extensive coverage of GARCH. Good chapter on VaR. This book has now been superseded by the excellent Market Risk Analysis series of four books published in Volume II deals with GARCH in depth. See Market Risk Analysis. Home Search Hoadley Site. Overview Price List Buy now Login - Existing Users. General Enquiries Commercial License Enquiries. Overview Feature Highlights Premium Features. Without Dividends With Dividends.

Value at Risk VaR Portfolio Analysis, Asset Allocation. Options Strategy Evaluation Tool Frequently Asked Questions FAQs.

On the day before the ex-dividend date sproviding the dividend is greater than the present value of the cost of holding the underlying asset to expiration and the time value premium remaining on the call is negligible ie the call is well into the money. In practice when there are multiple dividend payments the optimal exercise time will usually but not always be the day before the last ex-dividend date.

When the put is sufficiently in the money so that time value premium remaining is negligible. The Option Strategy Evaluation Tool comes with a number of sample strategies. One of these is an illustration of put-call parity, which consists of selling a call, buying a put, and buying the underlying asset. If the funding box is not checked then the profit from put-call parity will not be zero, but will equal the funding costs of the deal.

Checking the box will produce a profit of zero. Writing a covered call is the same as writing a naked put If you don't include funding costs the profit from the covered call will be a little greater than that from a naked put.

The difference is exactly equal to the funding costs the cost of carrying the stock offset by the initial credit from writing the options plus interest from dividends received. If you check this box, the profits from both strategies will be exactly the same. You can use the 'comparison area' of the tool to compare the two strategies on the same pay-off diagram to check this out. So checking this box lets you compare strategies which have identical payoffs but very different funding requirements, like conversions, in a more meaningful manner.

A useful educational site for learning about the art of options trading.