The Greeks Explained: Options Analysis in Excel

[@RyanOConnellCFA]

💾 Purchase Excel File: ► Purchase the file created in this video here: ryanoconnellfinance.com/product/option-greeks-calculator-in-excel/ 🎓 Tutor With Me: 1-On-1 Video Call Sessions Available ► Join me for personalized finance tutoring tailored to your goals: ryanoconnellfinance.com/finance-tutoring/

[@RyanOConnellCFA]

@@hihi-dt3sq Thank you for letting me know about the incorrect wording on this comment, I've edited it

[@andyyoo2948]

You Beautiful SoB - I've never seen anyone marry Excel with Financial Concepts as well as you. Please continue!!!

[@RyanOConnellCFA]

Lol now that is one of my all time favorite comments! I've got no plans of slowing down 💪

[@srinathuthay938]

Man!! You're a Gem , Im serious Please continue to break some complex models . I've become fan of you now With love frim INDIA

[@MM-uz5nv]

Fantastic content (your whole channel) - this what YT was meant to be about, quality, factual, educational content. The examples in Excel make understanding of the Greeks so much easier in this case. Thank you!

[@RyanOConnellCFA]

It is my pleasure, and thank you for that feedback! It means a lot to me 🙏

[@soniadolar7301]

Thanks!

[@RyanOConnellCFA]

Thank you, I appreciate the support! I don't get these super thanks very often. You're the best!

[@ashwinjanyani]

Hi Ryan, you are doing great job. thank you!

[@RyanOConnellCFA]

I really appreciate that feedback my friend!

[@miguelcarvallosayago165]

Great videos. Thank you Ryan

[@RyanOConnellCFA]

My pleasure Miguel!

[@lyntonbr]

Thanks for the video. Can you make another using the other Black-Scholes formula that takes the dividend of the stock in the greeks calculation?

[@RyanOConnellCFA]

My pleasure, I can definitely look at this down the road!

[@Brown_Lightning]

Hi Ryan, thank you for posting this video. I am a bit confused about the call/put chart around the 12:00 minute mark. Why would you want your put to move towards a $60 strike price ? I thought you make money on puts as the price of the underlying stock goes down? So how would you make $20 by having a put that would move towards the $60 strike price?

[@RyanOConnellCFA]

Hey, it is my pleasure! I think you may be confusing the strike price (K) on the graph with the underlying stocks price (S). For a put option, a higher strike price is more valuable. For example, if the strike price is $60 and the underlying stock price is $40, that means that if I own the put I can sell something worth $40 for $60, which is a $20 positive payoff. Does that make sense?

[@Brown_Lightning]

Hi Ryan, thank you for taking the time to explain this out to me. You’re right, I was looking at the graph wrong. I appreciate the help!

[@RyanOConnellCFA]

@@Brown_Lightning It is my pleasure!

[@monu284]

Awesome Sir Thanks a lot

[@winsonfang5751]

Hi Ryan, thanks for the video, very helpful. I have a quick question - at 21:46, when calculating the formula for call Rho, why the N(d2) use a different excel formula than that when we calculate N(d1). Do these two formula give the same results? Thanks!!!

[@philguiang]

Hello Ryan, thank you sharing this. Just a quick question, how do you select the appropriate US Treasury tenor as input in the option pricing model? Should the US treasury tenor match the tenor/expiration of the option?

[@RyanOConnellCFA]

Hello @philguiang, you've got it! Generally, when selecting the US Treasury rate for use in an option pricing model, it's a common practice to match the maturity of the Treasury rate with the expiration tenor of the option. This approach aligns the risk-free rate's time horizon with the option's life.

[@victoricus1]

so d1 is the probability that the underlying asset's price will be above the strike price at expiration? d1 of 0 (underlying price is above or below strike price) is 50%?

[@RyanOConnellCFA]

I would say that n(d1) is the probability that the option will expire in the money and a d1 of 0 should be about 50%! I've got a video where I more clearly explain all these probabilities in Black Scholes here: kzbin.info/www/bejne/gGeyqoasiZKDeqc

[@victoricus1]

@@RyanOConnellCFA thank you, Ryan!

[@RyanOConnellCFA]

@@victoricus1 My pleasure! Love your profile pic of the cat with a VR headset by the way lol

[@victoricus1]

@@RyanOConnellCFA awww, that's sweet of you to say so) if only i had enough time to play games, but, alas, time is slipping away the older you get

[@victoricus1]

ok, so, greeks are used to estimate risk vs potential gain for a number of contracts? we can use them to compare different contracts in terms of risk management? for higher greek values we earn more but incur more risk, and vice versa for less volatile derivatives?

[@RyanOConnellCFA]

Yes, you're on the right track! Greeks are indeed used to estimate and manage the risk versus potential gain for options contracts, allowing for a comparison of different contracts in terms of their risk profiles. While higher Greek values often indicate higher potential returns, they also typically come with increased risk

[@visunashokkumar1782]

Hey Ryan This is some Good quality content thank you for the info. (Just a tip for your Video/ face cam) Your face cam feels a bit laggy or slow you could try to put the shutter speed on 1/60 or something near that to fix it. Or have something light up your face.

[@hernanalzate1582]

Great vid Ryan, would be great to make a new one explaining the rationale of N(d1), (-d1) and N(d2), (-d2); for Calls and Puts, respectively. Thx in advance.

[@RyanOConnellCFA]

Hey Hernan, thank you for becoming a channel member and sorry for the late reply! I explain that a bit here in this video: kzbin.info/www/bejne/gGeyqoasiZKDeqc I can look into this topic in more detail in the future

[@seanwoolsey6787]

@RyanOconnellCFA is your tutoring service strictly for business operators or for individual investors as well? Asking because I am not sure which, if any, of the pricing options would be best.

[@RyanOConnellCFA]

Hey Sean, I have been tutoring business operators. It depends on whether the nature of the business and the problem you are looking to discuss is within my realm of expertise. Would you like to send me an email with more details here? [e-mail]

[@antoniousai9525]

Hi Ryan, congratulations on your videos. With Excel, is it possible to create, in a single graph, the pay off at expiry, the at now curve and manage different expiries of an options strategy?

[@RyanOConnellCFA]

Hi @antoniousai9525, thank you for the kind words! Yes, with Excel, you can indeed create a single graph showing the payoff at expiry, the 'at now' curve, and manage different expiries for an options strategy by utilizing its charting tools and formulas to calculate the respective values. This might require some setup with the options data and using Excel's more advanced features like data tables and conditional formatting to dynamically manage and visualize different scenarios. I'll consider making a tutorial on this topic in the future to help guide you through the process!

[@antoniousai9525]

Dear Ryan, thank you for your response and your availability. Happy Sunday.

[@RyanOConnellCFA]

@@antoniousai9525 My pleasure! Happy Sunday to you as well

[@jonathanmaynard6311]

When you compute theta, is that over the entire time the option has left or is that day by day? The value seems rather high for a single day move. Thanks in advance!

[@HosseinAhmadi-x3n]

how can We use them to calculate implied volatility??

[@jens4077]

I am working on obtaining my Level 1 CFA certificate. Is it necessary to have an in-depth knowledge of company accounting to get started in practice?

[@RyanOConnellCFA]

Great job on starting the journey! I don't think it is necessary to have that knowledge. You will need to know a bit but you can learn it in the CFA curriculum as you are going through your studies. Once section is a bit heavy on accounting as it relates to financial reporting

[@billmietelski]

How can we change cell D6 to Days To Expiration? Never have I ever looked up an option chain that had 0.5 years to expiration. :)

[@RyanOConnellCFA]

T =time in years. I'll give you an example: Lets say that today is 5/22 and we are looking at an option that expires two days from now on 5/24. T = days until expiration/days in a year T = 2/365 = 0.005

[@billmietelski]

@@RyanOConnellCFA Thanks, Ryan! I alreaady bought & downloaded the spreadsheet. I assumed I could figure it out (eventually) on my own, but your example will help. :)

[@RyanOConnellCFA]

@@billmietelski My pleasure, good luck playing around with it!

[@antoniocarvalho1401]

Hi, Ryan! First, thank you for your video. If the underlying asset was a dividend paying stock, would it be enough to adjust the calculation of N(d1) and N(d2) by subtracting the continuous dividend yield (q) on the numerator and keep all the rest equal in the computations of Delta, Gamma and Vega for call options? Or should those also be adjusted by multiplying the delta, gamma, and vega formulas by e^(-qT)? Hope I was not too confusing, keep up the great work! :)

[@TheSherifsaad]

Hi, how do you interpret for ATM options for instance a theta call and put of -3.7 and -2.9, does it mean the option will lose this dollar amount per day?, and vega of 11.2, thanx

[@FrancoQuaranta-b5j]

Hi Ryan, Thanks for the great tutorial. I have a slight deviation with the Theta calculation. Apparently in Google Sheets, the function NORM.S.DIST allows only one parameter and rejects the TRUE and FALSE statements. Is there a different function to get around this? Thank s in advance Frank