Black-Scholes
Last updated
Last updated
The Black-Scholes (BS) widget in Thales OSS leverages the Black-Scholes model, a cornerstone in Options pricing theory. This widget allows traders to input key parameters and receive immediate calculations of an Option's theoretical price and its Greeks, facilitating more precise and informed trading strategies.
Input values for the BS can be entered in two ways: directly (manually) into the provided fields, or indirectly through the input interface (inlets) which can receive data from external widgets. The output interface (outlet) of the BS widget can then be used to send the calculated data to other widgets for further processing or visualization.
Two input parameters in the BS require special attention: Option Price and IV (implied volatility) or Volatility.
It's crucial to understand the relationship between Option Price and IV or Volatility. The Black-Scholes model used by this widget accepts either Option Price or Volatility as input and calculates the other parameter as an output. This means you can input only one of these parameters at a time, and the widget automatically computes the other value.
By toggling between Option Price and Volatility, you can specify which parameter to input, and which to calculate.
When switching between Option Price and Volatility in the BS, it may be observed that Volatility is sometimes referred to as IV (implied volatility), depending on the chosen input parameter. If Option Price is entered, the implied volatility is calculated based on this price and other inputs by the widget. This calculated volatility from the Black-Scholes model is known as "implied volatility". On the other hand, if Volatility is directly input, it represents an estimated or specified volatility that is not implied by market prices.
When an Options widget is connected to the BS (thorough the sockets), the parameters of the Option are automatically transferred to it. The BS then calculates its output values based on these parameters. A major advantage of this method is the ability to have real-time Options data received directly and utilized for analysis or passed on to other widgets in the dashboard.
The connection of the Black-Scholes widget to other widgets, such as the Graph widget or the Position widget, can also be achieved without using those icons mentioned above. This can be done through the outlet sockets of the BS, which can be linked to the inlet sockets of other widgets in the standard manner. This enables the calculated results and model parameters to be directly transmitted to the Graph widget or the Position widget for further analysis or position management.
A context menu appears when the outlet of the BSis right-clicked, providing a selection of widgets to which it can be connected.
At the bottom of the BS, there are two expandable sections: "Greeks" and "Contract Values". These sections can be expanded or collapsed by clicking on the respective arrow icon. Additional parameters of the modeled option, including the important Option metrics known as the "Greeks", are displayed in these sections as calculated by the model. In the "Contract Values" the intrinsic and extrinsic values of the contract is shown.
In the upper right corner of the BS, there is a graph icon . If this icon is clicked, a graph widget is automatically opened, which is then connected to the BS and visualizes the corresponding calculated data.
Clicking on the two arrows in the top right corner of the Black-Scholes widget opens a box. The user can enter the side and size of a position. Subsequently, a Position widget, a Strategy widget, and a Graph widget are automatically created, displaying the Black-Scholes data as a position.
