Black-Scholes model for pricing European puts, calls

Input data
Type of option (1 for call, 2 for put) 1
Stock price $35.00
Exercise price $40.00
Duration (years) 0.50
Riskfree interest rate 5%
Volatility 40%

Quantities for Black-Scholes formula

d1 -0.24229505 N(d1) 0.4042758
d2 -0.52513777 N(d2) 0.2997437

Option price $2.46

Black-Scholes model for pricing European puts, calls

Input data
Type of option (1 for call, 2 for put) 1
Stock price $35.00
Exercise price $40.00
Duration (years) 0.50
Riskfree interest rate 5%
Volatility 40%

Quantities for Black-Scholes formula

d1 -0.24229505 N(d1) 0.4042758
d2 -0.52513777 N(d2) 0.2997437

Option price $2.46

Data table for sensitivity to volatility

$2.46
The higher
The higher the
the volatility,
volatility, the
thehigher
higher the
theprice
price of
of the
theoption.
option.
15% Higher volatility increases the possibility that the stock pric
Higher volatility increases the possibility that the stock pric
20% will increase
will increase aalot,
lot, which
whichisisthethe reason
reason for
for the
thehigher
higher price
priceoo
25% theoption.
the option. (It
(It also
alsoincreases
increases thethepossibility
possibilitythat
thatthe
thestock
stock
pricewill
price will decrease
decrease aalot, lot, but
but that
that doesn't
doesn't hurt
hurt the
the investor
investor
30% much ---- he
hecan
canjust
just let
let the
the option
optionexpire.)
expire.)
much
35%
40%
45%
50%
er the
er theprice
price of
of the
theoption.
option.
ssibility that the stock price
sibility that the stock price
ason for
ason for the
thehigher
higher price
priceof
of
possibilitythat
possibility thatthe
thestock
stock
doesn't hurt
doesn't hurt the
the investor
investor
expire.)
expire.)
Black-Scholes model for pricing European puts, calls

Input data
Type of option (1 for call, 2 for put) 1
Stock price $35.00
Exercise price $40.00
Duration (years) 0.50
Riskfree interest rate 5%
Volatility 40%

Quantities for Black-Scholes formula

d1 -0.24229505 N(d1) 0.4042758
d2 -0.52513777 N(d2) 0.2997437

Option price $2.46

Data table for sensitivity to current price

$2.46
$32
$33 The higher
The higherthe
thecurrent
current price,
price,the
the higher
higherthe
the
$34 chances are
chances areofofbeing
being"in
"inthe
themoney",
money",hence
hence the
the
higherprice
higher price of
of the
the option.
option.
$35
$36
$37
$38
higher the
higher the
ey", hence
ey", hence the
the
Black-Scholes model for pricing European puts, calls

Input data
Type of option (1 for call, 2 for put) 1
Stock price $35.00
Exercise price $40.00
Duration (years) 0.50
Riskfree interest rate 5%
Volatility 40%

Quantities for Black-Scholes formula

d1 -0.24229505 N(d1) 0.4042758
d2 -0.52513777 N(d2) 0.2997437

Option price $2.46

Data table for sensitivity to duration

$2.46
0.1
0.2 The higher
The higher the
the duration,
duration, the
the higher
higher the
the chances
chances are
are
0.3 that the
that the stock
stock price
price will
will increase
increase enough
enough to tobe
be "in
"in the
the
money", hence
money", hence the
thehigher
higher price
priceof
of the
the option.
option.
0.4
0.5
0.6
0.7
0.8
0.9
1.0
 er the
er the chances
chances are
are
enough to
enough tobe
be "in
"in the
the
off the
the option.
option.