How to calculate Premium with Black Scholes

Black-Scholes is a pricing model used to determine the fair price or theoretical value for a call or a put option based on six variables such as volatility, type of option, underlying stock price, time, strike price, and risk-free rate.

Step 2: Enter available values ​​into formulas to calculate

  • Spot Price: Is the current market price of the underlying asset. For example, you want to calculate the options price of ETH, currently ETH is priced at $ 1931.

  • Strike Price: The price defined in an option contract specifying the price that the underlying asset will be bought/sold at. On DBOE's ptions ain, there are different prices. Depending on the user's choice to enter the appropriate strike price, for example, if you choose a strike price of $2200 for an options that expires in 1 week, enter $2200 in this box.

  • Time to expiration: The date specified in the option contract at which the option can be exercised (European options) or that time before which options must be exercised (American options). Users choose the expiration date at 7/14/21 days like on DBOE (In the future, the exchange may open options with a longer expiration time).

  • Volatility: Crypto has a high volatility, so it is possible to let the volatility be 100%

  • r,d = 0

Step 3: See suggested price

After entering the parameters like the example in step 2, the web will help you calculate the call price and put price. These two prices are the option premium that the buyer has to pay to the seller (premium) when buying the option (long call / long put).

Suppose in the above example, if you want to buy an ETH call that expires in 7 days with a strike price of $2200, you need to pay a call premium of $26.5. If you want to buy an ETH put that expires in 7 days with a strike price of $2200, you need to pay a premium of $295.5.

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