ExtremeSpread

(SpreadType, OptionType, ModelStatistic, Asset, Strike, Time1stPeriod, TimeExpire, Volatility, InterestRate, YieldRate, MarketPrice, TimeFormat, InterestType, YieldType)

Argument

Description

SpreadType

Alphanumeric value indicating the type of extreme spread option:

•Standard = 1 or “s” (Standard extreme spread option)

•Reverse = 2 or “r” (Reverse extreme spread option)

OptionType

Alphanumeric value indicating the type of option:

•Call = 1 or "c" (case insensitive)

•Put = 2 or "p" (case insensitive)

ModelStatistic

Numeric value indicating the type of function required for the return value:

•Theoretical = 1

•Delta = 2

•Gamma = 3

•Theta = 4

•ImpliedVol = 5

•Vega = 6

•Rho = 7

•Psi = 8

•Lambda = 9

•StrikeSensitivity = 11

•ImpliedStrike = 13

Asset

The price of the underlying asset. Must be > 0.

Strike

The price at which the asset can be purchased if the option is a call or sold if the option is a put. Must be > 0.

Time1stPeriod

Time, expressed in either Days or Years (depending on the TimeFormat value), until the ending of the first period.

Must be 0 > Time1stPeriod > TimeExpire

TimeExpire

Time, expressed in either Days or Years (depending on the TimeFormat value), until the options expiration. Must be > 0.

Volatility

Annualized volatility of the underlying security. Must be > 0.

InterestRate

Risk-free interest rate expressed as a percentage. This rate is interpreted as a continuously compounded rate unless otherwise specified in the InterestType argument.

Must be > 0.

YieldRate

Yield, expressed as a percentage (dividends or interest yield), of the underlying asset price. This rate is interpreted as a continuously compounded rate unless specified otherwise in the YieldType argument.

MarketPrice

Optional. The selling price of the option in the marketplace. This input is required when implied volatility and strike are calculated. Price must be > 0.

TimeFormat

Optional. Alphanumeric value indicating the format of the time arguments (i.e. TimeExpire). If omitted, Days are used as the default. Specified as either:

•Days = 0 or "D" (case insensitive)

•Years = 1 or "Y" (case insensitive)

InterestType

Optional. Alphanumeric value indicating the type of InterestRate to use when evaluating the option. This value is converted to Continuously Compounded for the calculations. If omitted, a Continuously Compounded rate is used.

YieldType

Optional. Alphanumeric value indicating the type of YieldRate to use when evaluating the option. This value is converted to Continuously Compounded for the calculations. If omitted, a Continuously Compounded rate is used.

Calculate all of functions for a standard extreme spread call option whose asset price 180 days from expiration is $33.25, the exercise price is $35, the time to the first period is 90 days, the risk-free interest rate is 9% per annum, the yield rate is 6% per annum, and the annual volatility is 30%. All of the rates are considered continuous. So,

Input

Output

Variable

Value

Function

Name

Value

SpreadType

Standard

1

Theoretical:

2.318034

OptionType

Call

2

Delta:

0.239090

Asset

33.25

3

Gamma:

-0.033824

Strike

35

4

Theta:

0.004535

Time1stPeriod

90

5

Implied Vol.:

0.264987

TimeExpire

180

6

Vega:

0.092732

InterestRate

9%

7

Rho:

-0.048745

YieldRate

6%

8

Psi:

0.117666

Volatility

30%

9

Lambda:

3.429522

TimeFormat

Days

11

Strike Sensitivity:

-0.160906

MarketPrice

2

13

Implied Strike:

36.743299

Lookback

Fixed Strike Lookback

Partial Fixed Lookback

Partial Float Lookback

Lookback Monte Carlo