OPEN-SOURCE SCRIPT
Option Delta Candles
Description:
The Option Delta Candles with EMA indicator is designed to help traders visualize option delta values as candlesticks, calculated using the Black-Scholes model. It provides a unique way to view the cumulative delta changes in a normalized format, making it easier to identify trends and reversals. The addition of an EMA (Exponential Moving Average) overlay helps smooth out the data for better trend analysis.
Features:
Customizable Inputs:
Risk-Free Interest Rate: Adjust the risk-free rate for more precise option calculations.
Volatility: Input the volatility of the underlying asset to reflect current market conditions.
Strike Price: Enter the desired strike price of the option.
Days to Expiration: Specify the days until the option's expiration.
EMA Length: Modify the length of the EMA to suit different time frames and trading styles.
Visual Styles:
Customizable candle colors for bullish and bearish candles.
Configurable border and wick colors for personalized chart aesthetics.
How It Works:
The indicator uses the Black-Scholes model to calculate the delta of a European call option. Delta measures the sensitivity of the option's price to changes in the price of the underlying asset.
A cumulative delta is calculated and normalized to create candlestick representations, providing a visual cue of how the option delta changes over time.
The scaled delta values are normalized between 0 and 1, allowing for a consistent view of relative strength and weakness.
The EMA overlay helps identify smoothed trends and potential reversals within the delta data.
Applications:
Trend Identification: The indicator helps spot trends and potential reversals in option delta movements.
Volatility Analysis: By visualizing option delta, traders can gain insight into how changes in volatility impact options pricing.
Advanced Analysis: This tool is ideal for options traders and analysts looking to integrate delta analysis into their strategies.
Use Cases:
Traders can use the candlestick view to understand shifts in market sentiment through delta changes.
Options Analysts can visualize delta fluctuations over time, aiding in complex options trading strategies.
Technical Analysts may combine this indicator with other tools to confirm signals and enhance trading decisions.
Indicator Configuration:
Input Settings:
Risk-free interest rate (as a percentage).
Volatility (standard deviation) in percentage.
Strike price of the option.
Days remaining until expiration.
EMA length for trend analysis.
Style Customization:
Select colors for bullish and bearish candles, border, and wicks.
Change the color of the EMA line to distinguish it on the chart.
Release Notes:
Initial Version: Includes full implementation of the Black-Scholes delta calculation with customizable EMA and normalized candlestick view.
Future Updates: Potential additions may include enhancements for put options and integrated alerts.
The Option Delta Candles with EMA indicator is designed to help traders visualize option delta values as candlesticks, calculated using the Black-Scholes model. It provides a unique way to view the cumulative delta changes in a normalized format, making it easier to identify trends and reversals. The addition of an EMA (Exponential Moving Average) overlay helps smooth out the data for better trend analysis.
Features:
Customizable Inputs:
Risk-Free Interest Rate: Adjust the risk-free rate for more precise option calculations.
Volatility: Input the volatility of the underlying asset to reflect current market conditions.
Strike Price: Enter the desired strike price of the option.
Days to Expiration: Specify the days until the option's expiration.
EMA Length: Modify the length of the EMA to suit different time frames and trading styles.
Visual Styles:
Customizable candle colors for bullish and bearish candles.
Configurable border and wick colors for personalized chart aesthetics.
How It Works:
The indicator uses the Black-Scholes model to calculate the delta of a European call option. Delta measures the sensitivity of the option's price to changes in the price of the underlying asset.
A cumulative delta is calculated and normalized to create candlestick representations, providing a visual cue of how the option delta changes over time.
The scaled delta values are normalized between 0 and 1, allowing for a consistent view of relative strength and weakness.
The EMA overlay helps identify smoothed trends and potential reversals within the delta data.
Applications:
Trend Identification: The indicator helps spot trends and potential reversals in option delta movements.
Volatility Analysis: By visualizing option delta, traders can gain insight into how changes in volatility impact options pricing.
Advanced Analysis: This tool is ideal for options traders and analysts looking to integrate delta analysis into their strategies.
Use Cases:
Traders can use the candlestick view to understand shifts in market sentiment through delta changes.
Options Analysts can visualize delta fluctuations over time, aiding in complex options trading strategies.
Technical Analysts may combine this indicator with other tools to confirm signals and enhance trading decisions.
Indicator Configuration:
Input Settings:
Risk-free interest rate (as a percentage).
Volatility (standard deviation) in percentage.
Strike price of the option.
Days remaining until expiration.
EMA length for trend analysis.
Style Customization:
Select colors for bullish and bearish candles, border, and wicks.
Change the color of the EMA line to distinguish it on the chart.
Release Notes:
Initial Version: Includes full implementation of the Black-Scholes delta calculation with customizable EMA and normalized candlestick view.
Future Updates: Potential additions may include enhancements for put options and integrated alerts.
Open-source script
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in publication is governed by House rules. You can favorite it to use it on a chart.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.