Black Scholes Calculator
- Last Updated: Sunday, 18 November 2018
This Black-Scholes calculator allows you to figure out the value of a European call or put option. The calculator uses the stock’s current share price, the option strike price, time to expiration, risk-free interest rate, and volatility to derive the value of these options. The Black-Scholes calculation used by this tool assumes no dividend is paid on the stock.
The variables used in our online calculator are defined in detail below, including how to interpret the results.
Current Share Price ($)
This is the current selling price, or the market price, of the stock used in this analysis. While this calculator does not consider dividends directly, subtracting the present value of a stock’s future dividend payment from the current share price may be useful in the modeling of dividends.
Option Strike Price ($)
This is the strike price, which is the price point that an investor can buy or sell shares of the stock covered by this option.
Time to Expiration (Years)
This is the number of years that will elapse before the option expires. For example, if the option expires in six months, then the value entered would be 6 months / 12 months = 0.50 (years).
Risk-Free Interest Rate (%)
The Black-Scholes model assumes the risk-free interest rate is constant and known. There is no true risk-free interest rate; however, U.S. Government Treasury Bills (T-Bills) are often used to model a risk-free interest rate.
There is a variety of ways to measure a stock’s propensity to rise or fall, also known as volatility. This value can be estimated by calculating the historical standard deviation of a periodic percent change in price, divided by the square root of time. That information can then be used to model volatility into the future, along with any adjustments deemed necessary by the stock analyst or investor.
European Call Value ($)
A call option allows the holder to buy shares of stock at the strike price in the future. A European call option places a restriction on the holder to exercise the option only on the expiration date.
European Put Value ($)
A put option allows the holder to sell shares of stock at the strike price in the future. A European put option places a restriction on the holder to exercise the option only on the expiration date.
Disclaimer: These online calculators are made available and meant to be used as a screening tool for the investor. The accuracy of these calculations is not guaranteed nor is its applicability to your individual circumstances. You should always obtain personal advice from qualified professionals.