Impl Volty- 1 Option

Implied Volatility is the parameter component of the Black-Scholes formula, a mathematical model that estimates the pricing variation over time of financial instruments, such as options contracts.

Description

Implied volatility estimates the pricing variation over time of financial instruments, such as options contracts. It also shows how the marketplace views where volatility should be in the future.

The five other inputs of the Black-Scholes model are the market price of the option, the underlying stock price, the strike price, the time to expiration, and the risk-free interest rate.

Implied volatility is calculated by taking the market price of the option, entering it into the Black-Scholes formula, and back-solving for the value of the volatility. But there are various approaches to calculating implied volatility. One simple approach is to use an iterative search, or trial and error, to find the value of implied volatility.

Default Inputs

ExpMonth( 0 ) sets the expiration month.

ExpYear( 0 ) sets the expiration year.

StrPrice( 0 ) sets the strike price.

Rate100( 0 ).

OptMktVal( close data2 ).

PutCall( put ) sets whether to put the call or not.

AssetPr( close data1 ) sets the price of the asset.

AlertLength( 14 ) sets the number of bars to determine the alert criteria.