Variety Distribution Probability Cone forecasts price within a range of confidence using Geometric Brownian Motion (GBM) calculated using selected probability distribution, volatility, and drift. Below is detailed explanation of the inner workings of the indicator and the math involved. While normally this indicator would be used by options traders, this can...
Purpose: This script will help an options trader asses risk and determine good entry and exit strategies Background Information: The true range is the greatest of: current high minus the current low; the absolute value of the current high minus the previous close; and the absolute value of the current low minus the previous close. The Average True Range (ATR) is...
This is the XSP version of SPX, basically it's just the price of SPX divided by 10 and shown using labels. Should only be used on SPX to watch the price of XSP since XSP doesn't have real-time data ATM. Can be used on any time frames. This script allows you to view the Daily (O, H, L, C) and Yesterday's (O, H, L, C) with a non intrusive price line. Allows for...
Using Pinescript, we will use charts of Cash/Future to trade in Options. Note this strategy works well with even the free version of TradingView. The Relative Strength Index ( RSI ). Is a momentum oscillator that measures the speed and change of price movements. The RSI oscillates between zero and 100. Increasing RSI shows increasing bullish momentum. Decreasing...
Welcome to the Ichi-Price Wave. This indicator is designed for day trading options contracts for any ticker, using a number of indicators — Ichimoku Cloud, Volume-Weighted Average Price, Stochastic Relative Strength Index, Exponential Moving Average (13/48) — and calculating how they interact with each other to provide entry and exit signals for both Calls and...
For a reset option type 2, the strike is reset in a similar way as a reset option 1. That is, the strike is reset to the asset price at a predetermined future time, if the asset price is below (above) the initial strike price for a call (put). The payoff for such a reset call is max(S - X, 0), and max(X - S, 0) for a put, where X is equal to the original strike X...
These options can be exercised at their initial maturity date /I but are extended to T2 if the option is out-of-the-money at ti. The payoff from a writer-extendible call option at time T1 (T1 < T2) is (via "The Complete Guide to Option Pricing Formulas") c(S, X1, X2, t1, T2) = (S - X1) if S>= X1 else cBSM(S, X2, T2-T1) and for a writer-extendible put is ...
In a reset call (put) option, the strike is reset to the asset price at a predetermined future time, if the asset price is below (above) the initial strike price. This makes the strike path-dependent. The payoff for a call at maturity is equal to max((S-X)/X, 0) where is equal to the original strike X if not reset, and equal to the reset strike if reset....
A fade-in call has the same payoff as a standard call except the size of the payoff is weighted by how many fixings the asset price were inside a predefined range (L, U). If the asset price is inside the range for every fixing, the payoff will be identical to a plain vanilla option. More precisely, for a call option, the payoff will be max(S(T) - X, 0) X 1/n...
A log contract, first introduced by Neuberger (1994) and Neuberger (1996), is not strictly an option. It is, however, an important building block in volatility derivatives (see Chapter 6 as well as Demeterfi, Derman, Kamal, and Zou, 1999). The payoff from a log contract at maturity T is simply the natural logarithm of the underlying asset divided by the strike...
A log option introduced by Wilmott (2000) has a payoff at maturity equal to max(log(S/X), 0), which is basically an option on the rate of return on the underlying asset with strike log(X). The value of a log option is given by: (via "The Complete Guide to Option Pricing Formulas") e^−rT * n(d2)σ√(T − t) + e^−rT*(log(S/K) + (b −σ^2/2)T) * N(d2) where N(*) is...
A log contract, first introduced by Neuberger (1994) and Neuberger (1996), is not strictly an option. It is, however, an important building block in volatility derivatives (see Chapter 6 as well as Demeterfi, Derman, Kamal, and Zou, 1999). The payoff from a log contract at maturity T is simply the natural logarithm of the underlying asset divided by the strike...
At maturity, a powered call option pays off max(S - X, 0)^i and a put pays off max(X - S, 0)^i . Esser (2003 describes how to value these options (see also Jarrow and Turnbull, 1996, Brockhaus, Ferraris, Gallus, Long, Martin, and Overhaus, 1999). (via "The Complete Guide to Option Pricing Formulas") b=r options on non-dividend paying stock b=r-q options on...
Power options can lead to very high leverage and thus entail potentially very large losses for short positions in these options. It is therefore common to cap the payoff. The maximum payoff is set to some predefined level C. The payoff at maturity for a capped power call is min . Esser (2003) gives the closed-form solution: (via "The Complete Guide to Option...
Standard power options (aka asymmetric power options) have nonlinear payoff at maturity. For a call, the payoff is max(S^i - X, 0), and for a put, it is max(X - S^i , 0), where i is some power (i > 0). The value of this power call is given by (see Heynen and Kat, 1996c; Zhang, 1998; and Esser, 2003). (via "The Complete Guide to Option Pricing Formulas") c = S^i...
There are two main categories of power options. Standard power options' payoff depends on the price of the underlying asset raised to some power. For powered options, the "standard" payoff (stock price in excess of the exercise price) is raised to some power. A power contract is a simple derivative instrument paying (S/ X)^i at maturity, where i is some fixed...
A moneyness option is basically a plain vanilla option where the strike is set to a percentage of the future/forward price. For example, a 120% moneyness call would have a strike equal to 120% of the forward price. A 120% moneyness put would have a spot equal to 120% of the strike. The value of this option is given in percent of the forward. The value of a...