On
the following pages, we will be demonstrating how to make a simple but
useful option price calculator, using Visual Basic. (Or see the Downloads
page for other ways to get the program.)
We
will then expand on the option calculator by adding three more option
"legs" and a stock leg, plus a chart and some other features, which
will turn the option price calculator into an option graphing program
capable of showing entry prices and three time lines for any option
strategy with up to four legs and a stock leg, such as bull calls, butterflys,
iron condors, covered calls, collars, and so on.
We
will be using Visual Basic because it is a very approachable programming
language, with a syntax that almost looks like plain English instructions.
Other programming languages such as C or C# use a syntax and other conventions
that require a steeper learning curve.
You
do not need to know any complicated mathematics to complete these projects.
We will be showing all the necessary functions, and all you need to
do as far as math is copy and paste to make a working program. However,
if you are interested in learning programming, or want to see just what
goes on behind the scenes when an option price is calculated, then you
can study the code and/or the mathematics as much as you wish.
Visual
Basic Express Edition is available for FREE - see the page "Get
started with Visual Basic". Visual Basic Express can make stand-alone
Windows programs (.exe files) that work just like any other Windows
program on your computer. You will be able to compile your completed
option calculators and run them by double-clicking an icon on your desktop,
or by pinning them to your taskbar and running them with a single click.
Just
because Visual Basic Express is easy to use and free, does not mean
it is slow. On a modern desktop computer, the finished graphing program
will be able to calculate option prices for four option legs and a stock
leg, across a range of $10 in stock prices in 1 cent increments, and
draw three colored lines on the chart representing the position gain
or loss on three different dates, all in a fraction of a second.
So
let's get started! Just follow the steps given below, in order, and
you will be on your way to your own useful option pricing and graphing
software.
Option-Graph.com
