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This page explains how to do it in the Black-Scholes Calculator but the logic is the same if you do it on your own and prepare all the Black-Scholes model formulas yourself. You want to find implied volatility of a call option with strike price of 55 and 18 calendar days to expiration. The underlying stock is currently trading at Now you have entered all the parameters and the resulting option price appears in cell H4 or H6 if you are working with a put option.
Using the values in our example, it is 1. Unless you were very lucky, it is not equal to the actual price at which the option is trading at the moment in our example 1. The reason is the volatility parameter, where you have entered a number you just guessed.
Do not type any numbers in cells H4 and H6 the resulting option prices. These cells contain formulas and if you overwrite them, the spreadsheet will not work correctly. Now you can try to find the implied volatility by trial and error by entering different values in cell C8.
If the real option price is lower than your result as in our example , try lower volatility, and vice versa. As soon you get close enough to the real option price depending on your desired level of accuracy , you are done. The implied volatility is in cell C8. The Goal Seek feature in Excel does exactly the same thing, only the computer is able to perform this trial and error exercise in split of a second and get a very accurate result immediately. Once you have the input parameters set, go to Excel main menu and select Data , Data Tools , What-If Analysis , Goal Seek in Excel — the path may be slightly different in other versions.
Now press OK and the desired implied volatility appears in cell C8 You can see more information about all features, calculations, and guide contents here. If you don't agree with any part of this Agreement, please leave the website now. All information is for educational purposes only and may be inaccurate, incomplete, outdated or plain wrong.
Macroption is not liable for any damages resulting from using the content. No financial, investment or trading advice is given at any time. Home Calculators Tutorials About Contact. Tutorial 1 Tutorial 2 Tutorial 3 Tutorial 4. Calculating Implied Volatility in Excel. I will illustrate the Excel calculation of implied volatility step-by-step on the example below.
Example You want to find implied volatility of a call option with strike price of 55 and 18 calendar days to expiration. Setting the Input Parameters First, you must set all the parameters that enter option price calculation: You may also enter exact times in cells C16 and C18 if you want to be very precise.
Trial and Error Approach Now you can try to find the implied volatility by trial and error by entering different values in cell C8. Using Excel Goal Seek The Goal Seek feature in Excel does exactly the same thing, only the computer is able to perform this trial and error exercise in split of a second and get a very accurate result immediately.
The Goal Seek window pops up and asks you to enter three inputs: In our example enter 1.