Options Price And Greeks Change In A 30 Day Period

In this video we are going to discuss the options trading spreadsheet worksheet called GreeksChg, which shows the change in the options price due to a change in the greeks over the course of an expiration.

This options worksheet gives us another way to look at theoretical value and the option greeks, by charting their change over an extended 30 day period.  Additionally, the worksheet allows these changes to be seen across the 30 day period for changes in the underlying and volatility.

Options Spreadsheet GreeksChg Worksheet

Options Spreadsheet GreeksChg WorksheetWhen you look at the left side of the worksheet you will see the blue cells for inputting.  The top cells are our basic option pricing formula, but the date inputs are called date1 and date2, with the output called period.

I did this because we are looking at the changes over a 30 day period, instead of modeling from a specific date to expiration – this is simply a label change and not a formula change that is intended to be more related to what we are doing with this particular options worksheet.

At the bottom you will see 4 additional inputs; the first 2 are called underlying change and volatility change.

These inputs are where you could add incremental changes to either or both of these inputs, and theoretical value and the greeks will be recalculated.

The next input is labeled g+t, or gamma+theta – and the last input labeled chart currently says thv, or theoretical value.  This input ‘controls’ what is being charted.  In the video, you are looking at the change in theoretical value for the 30 day period.

Besides thv, you can input delta, gamma, vega, or theta and then chart the change in these over the 30 day period.

If you would enter g+t in the g+t input and then enter the theta input, the chart will now show theta on the bottom and the net of gamma and theta on the top.

Theoretical Value And Greeks Changes Over 30 Days

After you do your inputting, you will be able to clearly see a chart for the changes in the various greeks and theoretical value over 30 days – note the following characteristics:

  • The acceleration in the change in the last few days of expiration, because the option must expire at intrinsic value and all the greeks are converging on zero [except delta]
  • The changes if there is a flat market across the period – theoretical value goes down, delta remains relatively flat, gamma goes up, theta goes up [but not as much as gamma does, and vega goes down
  • The changes if there is a move up or down in the underlying [the video shows a .10 incremental daily move from 45 to 47.90] – theoretical value goes up, delta goes up, gamma goes up and then sharply down into expiration, vega goes down at a faster rate, theta goes up and then sharply down into expiration

Again, remember that as you approach expiration that the theoretical value becomes the intrinsic value of the option [meaning that all time value must come out of the price, and all of the greeks will go to zero – except delta, which is essentially the movement in the underlying.