Black Scholes Merton Calculator
We are going to extend our previous articles on
calculating option delta and
extracting the risk free rate to create a comprehensive Black Scholes Merton option calculator for cryptocurrency. What makes this code special and unique is two fold:
1. We will use live trade data from DeriBit for BTC or ETH options to calculate the greeks
2. We will use par rates published by the US Treasury as the Risk Free Rate (RFR), but more specifically, we will use the rate the coincides with the maturity of option (this is known as duration matching). The RFR is different based on where in the curve (what maturity) you are referencing and we dynamically pull this information at run time (data is published/updated daily by US Treasury)
Bringing it All Together
This comprehensive Black Scholes Merton Option Calculator will do the following each time it is executed:
1. Connect to DeriBit API and retrieve the most recent option transaction for Bitcoin options
2. Determine which Risk Free Rate coincides with the maturity of the option
3. Calculate all relevant 1st order Greeks for the option transaction: Delta, Gamma, Vega, Theta, and Rho for the option
4. Display all inputs and results
Here is an example results/output from script
Of course, all code is commented line by line so that you understand what is going on, and free for you to modify to fit your own purposes. We also have our support team always available via email if you have questions or issues implementing or understanding any of the published code!
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THE PERFORMANCE OF TRADING SYSTEMS IS BASED ON THE USE OF COMPUTERIZED SYSTEM LOGIC. IT IS HYPOTHETICAL.
PLEASE NOTE THE FOLLOWING DISCLAIMER.
CFTC RULE 4.41: HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL
PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN
EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS,
SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE
DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY
TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. U.S. GOVERNMENT REQUIRED DISCLAIMER: COMMODITY FUTURES
TRADING COMMISSION. FUTURES AND OPTIONS TRADING HAS LARGE POTENTIAL REWARDS, BUT ALSO LARGE POTENTIAL RISK.
YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN ORDER TO INVEST IN THE FUTURES AND OPTIONS MARKETS.
DON’T TRADE WITH MONEY YOU CAN’T AFFORD TO LOSE. THIS IS NEITHER A SOLICITATION NOR AN OFFER TO BUY/SELL FUTURES
OR OPTIONS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES
SIMILAR TO THOSE DISCUSSED ON THIS WEBSITE. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS.