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OPEN-SOURCE SCRIPT

vertical_pricer

By taylor_o
Updated


USAGE

1. Select the type of contract (call or put), the long strike, and the width.
2. Select the volatility model
3. The standard deviation is shown, enter it into the input.

The tool gives a theoretical price of a vertical spread, based on a
historical sample. The test assumes that a spread of equal width was sold on
every prior trading day at the given standard deviation, based on the
volatility model and duration of the contract. For example, if the 20 dte
110 strike is presently two standard deviations based on the 30 period
historical volatility, then the theoretical value is the average price all
2SD (at 20 dte) calls upon expiration, limited by the width of the spread and
normalized according to the present value of the underlying.

Other statistics include:
- The number of spreads in the sample, and percentage expired itm
- The median value at expiration
- The Nth percentile value of spreads at expiration
- The number of spreads that expired at max loss

Check the script comments and release notes for further updates, since Tradingview doesn't allow me to edit this description.
Release Notes
bug fix -- was using the wrong array for theo vals. should be working now.
Release Notes
Minor documentation changes.
Release Notes
- added far strike to description cell in the table
- set past forecast plot to be visible by default, since it doesn't clutter the view too much
Release Notes
fix lines, they should project the latest forecast for the proper number of bars now
Release Notes
- annualize with 252, rather than 365 periods

Note: this script is meant for the daily chart
EDGEoptionspricingspreadtheoreticalverticalVOLVolatility

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.

Want to use this script on a chart?

taylor_o

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.