Options Trading

Executive summary

Background

“Derivative” has been a really hard subject to learn for many students. While being a TA for the BusM411 Advanced Investment class, I found it sometimes hard as well to explain some derivatives concepts to students without visualizing them. I decided to do some researches on a couple of websites that helps generate a trading strategies involving options. The results on these websites were helpful but not really customized enough to be used by our students. These reasons really encouraged me to build a VBA model that would assist the learning process in options trading. Some similar models have been developed by many traders/programmers in many firms and are being sold for hundreds or even thousands of dollars. Even though this project would not be as complicated as real software’s that are being used in the industry, it is intended to be expandable for further use by separating the codes into many standalone usable functions/units. 

Overview

I built a VBA program that accepts users’ input to generate graphs that represent the relationship between the stock’s spot prices with their profit/loss position at option expiration, and relationship with different Greek values of Options trading. The project accepts users’ inputs of Stock Ticker to grab stocks’ information. A different method to get stock’s information by using Yahoo Finance API has been implemented to improve the processing speed without going through the process of recording a macro. The Workbook then will be customized to offer various positions in popular trading strategies (Long Put/call, Bull Spread, or Butterfly Spread, etc.)  Users can also input their own trading strategies into the model. The Option Trading Workbook uses Black Scholes Model to valuate stock options and generate the underlying data, which are different data vectors/arrays. These vectors will be used as inputs for the model’s data series.

Conclusion

Working on the project has been really helpful for me in terms of:

·         Understand more about options trading and the Black Scholes Model

·         Learn more about working with VBA’s dynamic arrays, data series for charts, user forms, and reading a downloaded file

·         Learn more about the importance of designing a complete project

·         Organizational skills to keep track and finish a whole project

Links:

• http://files.gove.net/shares/files/13w/hduc9690/OptionsTrading_Final_Project.pdf
• http://files.gove.net/shares/files/13w/hduc9690/OptionsTrading_Final_Project.xlsm