How it works
The Black-Scholes model is the industry-standard formula for theoretical option pricing. From five inputs — spot, strike, time to expiry, risk-free rate, and implied volatility — it derives both call and put theoretical values. Real market prices can diverge from theory due to supply/demand or event expectations, so treat this as a reference, not a trading signal.
FAQ
Q. Where do I find implied volatility (IV)?
A. You can usually find it on your broker's option chain screen. Historical volatility can be used as a rough substitute if IV isn't readily available.
Q. Is this accurate for dividend-paying stocks?
A. This uses the basic Black-Scholes model without a dividend adjustment, so stocks with large dividends may show a small deviation from the true theoretical price.