What is an Option Calculator?
A mathematical calculation algorithm known as an options calculator is used to forecast and evaluate options. You can use the options calculator to determine the implied volatility or theoretical value of an option’s premium. You must enter the following four required inputs before using the choice calculator:
- Spot price: This is the underlying asset’s current value.
- Interest rate: In this case, you must enter the market’s standard risk-free rate. The Reserve Bank of India’s website’s data on 91-day Treasury bills can be used to calculate interest rates.
- Dividend: You must enter the anticipated dividend per share in this area if the stock will go ex-dividend within the expiration period.
- Days until expiration: This is the number of days before the expiration date. In addition to these required inputs, implied volatility must be included as the fifth input if you want to calculate the theoretical value of an option’s premium.
- Options Price: The real market value for the options price must be entered in order to compute implied volatility. This is the market exchange rate at which the option is exchanged. You can develop a more effective options trading strategy by using the implied volatility and options price values that are derived using an options calculator.
Trading Strategy BTST (Buy Today Sell Tomorrow)
Customers can use the BTST trading strategy (Buy Today Sell Tomorrow) to sell shares before they are credited into a Demat account or taken delivery of. Sell Today Buy Tomorrow (STBT) is the opposite of BTST. The acronym BTST stands for “Buy Today Sell Tomorrow,” and it means that you must buy shares today and must sell them tomorrow. BTST trading refers to a method whereby traders buy shares today and sell them tomorrow in an effort to profit from short-term market volatility.
BTST Trading Settlement Cycle Features and Key Concepts:
- In the BTST trading technique, a settlement cycle is the amount of time needed to complete a transaction, at the end of which the seller of the securities receives the proceeds and the buyer of the securities receives the shares they purchased.
- Equities use the T+1 trade cycle and T+1 settlement cycle. Here, T stands for the trade date on which the purchase or sell order is made, and T+1 stands for the number of days needed to complete the trading transaction.
- T+2 trade cycle – In this settlement cycle, if the buyer places a buy order on T day, which is Monday, the money will be promptly deducted from the seller’s Demat account, but the shares won’t appear in the buyer’s Demat account until Wednesday.
Pros of the BTST Trading Strategy
- It enables you to profit from short-term volatility or rise/fall in stock prices.
- If you discover intraday trading to be unprofitable, BTST will give your transactions an additional two days to perform better.
Cons of the BTST Trading Strategy
- Most stockbrokers do not provide margins to BTST facilities, in contrast to intraday trading.
- Overnight risk