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Inputs in yellow
Put-call parity illustrated below
Black-Scholes Inputs
1 Stock (S) $42.00
2 Strike (K) $40.00 Sensitivity = delta; 2nd derivative = gamma
3 Volatity 20.0% Sensitivity = vega
Variance 4.00%
4 Riskfree rate (r) 10.00% Riskless rate per risk-neutral valuation; not expected return on stock! Sensitivity = rho.
5 Term (T) 0.50 Sensitivity = theta
6 Div Yield 0.00% Div yield effectively reduces stock price: option holder forgoes dividends
Call option
d1 0.7693
N(d1) 0.7791 N(d1) = delta
d2 0.6278
N(d2) 0.7349 N(d2) = Prob [option exercised; ITM at expiration] in a risk-neutral world
Call Price $4.759
Put option
-d1 -0.7693
N(-d1) 0.2209
-d2 -0.6278
N(-d2) 0.2651
Put Price $0.809
Put-call parity
Call + Disc. Strike $42.809
Put + Stock $42.809 aka, protective put
OPTION WORKSHEET: LONG TERM OPTIONS
k! Sensitivity = rho.