Options Forecasting
Options forecasting is conducted to generate price predictions for any desired options contract.
The following parameters must be entered: the desired underlying (equity), option type (call/put), strike price, expiration and underlying quantity. The tool then calculates fair value for the option and generates forecasts for the next 5 days or months.
The system also calculates the current price and a forecast for the underlying. Option prices forecast are derived on the basis of their derivative structure with respect to the forecast price of the underlying and forecasted volatility, using a version of the Black-Scholes formula.
Why conduct such forecasting?
Options forecasting helps identify short-term direction changes, knowledge of which allows avoiding risks attendant with options' heightened volatility.
What is special about this type of forecasting?
This option's forecasting is based on a combination of option pricing theory and statistical time series analysis. Our software forecasts the future ‘fair value’ prices for options.
Who uses this kind of forecasting?
Private investors have been able to trade options on the exchange since 1989. Our forecasting helps private investors make the right to buy and sell decisions.
Procedures and methods
- First a forecast is generated for the option underlying. Because the underlying does not expire, time series analysis methods, including particularly ARIMA models, can be directly applied. Future volatility can be forecast utilising ARCH models for example.
- The forecast value and volatility of the underlying are now used to calculate fair value applying the Black-Sholes formula and the applicable expiration, strike and leverage of the option. The future fair value calculated is forecast value of the option.
Have we piqued your curiosity?
If you are interested in our products or services, we gladly advise you individually: