Options calculator interactive brokers

Interactive Brokers Review 2017.

Interactive Brokers is a solid choice for active, advanced traders because of its international trade capabilities, low — and volume-based — commissions and quality trading platform. The broker isn’t a good fit for beginners or infrequent traders, as it provides little investor education, requires a high minimum investment and charges inactivity fees that will quickly eat into returns. Such investors may want to check out NerdWallet’s list of best brokers for beginner investors.

NerdWallet's rating: 4.0 / 5.

Quick facts.

Commissions: Fixed-rate and volume-tiered pricing, starting at $1 Account minimum: $10,000 Promotion: Special terms for clients 25 and younger.

Interactive Brokers is best for:

Advanced traders. Day traders. Penny stock traders. Margin accounts. Options trading.

Interactive Brokers at a glance.

• Forex ($10 million in assets required)

Where Interactive Brokers shines.

Low commissions: It’s hard to beat the stock and exchange-traded funds commission structure at Interactive Brokers, which favors frequent, high-volume traders at just $0.005 cent — one-half of 1 cent — per share. There’s a $1 minimum trade commission and a 0.5% maximum, and exchange and regulatory fees are included. The broker also offers tiered pricing to lower rates even more: Investors who trade more than 300,000 shares a month can pay $0.002 cent or less per share, depending on trade volume, although exchange and regulatory fees are extra on this plan.

Options trading, too, is offered at rock-bottom pricing, with just a 70 cent charge per contract and no base (minimum $1 per order), plus discounts for larger volumes.

Trading platform: Interactive Brokers’ Trader Workstation is considered one of the best trading platforms available for advanced traders. The desktop platform is fast and includes standard features like real-time monitoring, alerts, watchlists and a customizable account dashboard. An options strategy lab lets you create and submit both simple and complex multileg options orders and compare up to five options strategies at one time.

Desktop trading platform Trader Workstation.

Other tools include a volatility lab, advanced charting, heat maps of sector and stock symbol performance, paper trading and a mutual fund replicator, which helps users identify ETFs that replicate the performance of a selected mutual fund but offer lower fees. A new feature, InteractiveBroker FYIs, offers customized notifications about events that could affect a trader’s investments. Research, news and market data are also available, although in many cases there’s a premium subscription fee.

Novices will likely find Trader Workstation completely overwhelming, to the point of being unusable. But Interactive Brokers also offers a strong mobile trading app and IB WebTrader, a streamlined browser trading platform that is a bit easier to navigate.

Margin rates: Traders looking to use margin will love the rates that Interactive Brokers offers; they’re extremely low. The maximum margin rate is the benchmark rate plus 1.5%. The broker charges a blended rate based on account balance. It has a calculator on its website to help investors quickly do the math based on their account balance.

Investment selection: Interactive Brokers offers access to a huge selection of products, from standard offerings of stocks, options, ETFs, mutual funds and bonds to precious metals, forex trading and futures. In a change last year, the broker began requiring assets of $10 million or more for leveraged forex positions.

Where Interactive Brokers falls short.

Minimum investment requirement: The $10,000 minimum investment requirement is steeper than at other online brokers, which brings Interactive Brokers’ rating down a notch. The company does lower its minimum to $5,000 for individual retirement accounts and $3,000 for clients 25 or younger, which is a nice offering.

Inactivity fees: Here, too, the minimums are high for all but very frequent traders. Accounts with balances under $100,000 must meet a minimum of $10 a month in trade commissions, or Interactive Brokers will charge the difference as a monthly fee. Accounts with an equity balance of $2,000 or less must meet minimum trade commissions of $20. Again, there is a break here for clients 25 or younger, who have a minimum monthly trade commission of just $3.

Customer experience: Because Interactive Brokers has a variety of commission structures and added fees, it can be hard for investors to quickly identify what their costs will be. The website and trading platforms are clearly geared toward advanced traders, and the customer service is frequently reported to be subpar.

Is Interactive Brokers right for you?

Frequent and advanced traders could see significant commission savings at Interactive Brokers, due to the discounted pricing for high-volume traders. These investors will also benefit from the company’s quality trading platform and fast trade execution.

New investors likely won’t find a home here. The low commissions don’t make up for the high inactivity fees, and the account minimum and lack of educational materials and research are high barriers to entry.

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. : aosheanerdwallet. Twitter: arioshea.

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Interactive Tutorial and Widget User Agreement.

This Agreement governs your right to use the IB Options Calculator and other software provided by Interactive Brokers LLC for downloading. Please read it carefully. The IB software is provided with restricted rights and is the property of Interactive Brokers LLC. By using the software, you agree to be bound to the terms and conditions set forth in this agreement.

The Interactive Brokers Options Calculator and other software, including but not limited to downloadable widgets provided by Interactive Brokers LLC ("IB") for downloading (the "Software"), is provided for educational purposes only to assist you in learning about options and their theoretical fair value. It is not designed to provide investment advice, nor should you make any investment decisions based solely on the calculations, values, or other information obtained from the Software. The calculations obtained from the Software are based on a mathematical model which incorporates a variety of assumptions, some of which may not be applicable in the markets at the time of the calculation, and resulting prices may be different from actual prices or prices calculated by other mathematical models.

This license agreement between you and IB governs your right to use the Software. The Software is the intellectual property of IB and all rights not specifically granted to you hereunder are reserved by IB. You are hereby granted the non-exclusive right to use the Software. You agree not to copy, publish, transmit, transfer, license, sell, reproduce, modify, distribute, display, create derivative works from, or exploit the Software in any way. You agree not to alter, adapt, merge, decompile, disassemble, upload, post, reverse engineer the Software or participate in any of the foregoing activities. This license may only be modified or amended in writing, signed by you and IB. This license will be terminated automatically if you violate any of its terms and may be otherwise terminated by IB for any reason without notice. This license constitutes the parties' final, complete and exclusive agreement with respect to the Software.

The Software is provided "as is" and "as available" without warranty of any kind, either express or implied, including but not limited to any implied warranty merchantability or fitness for a particular purpose, regardless of whether IB knows or has reason to know of your specific needs. In addition, neither IB nor any other person makes any representations with respect to the Software and expressly disclaim all warranties. You are solely responsible for your use of the Software. If an implied warranty may not be disclaimed under applicable law, then any implied warranty is limited in duration to a period of thirty (30) days from the date the Software is first accessed by the end-user.

Neither IB nor any other person will be liable to you for damages in any circumstances including, without limitation, any loss of profits, loss of savings, damage to data or other incidental, direct, indirect, incidental, special, punitive, consequential, or other losses or damages of any kind arising out of the use or performance of the Software, even if IB or any other person has been advised of the possibility of such damages or claim by any third party.

Results and values obtained from the Software are examples of theoretical value calculations for options contracts and cannot be reproduced without duplication of all assumptions used in the examples. For simplification, the calculations do not include tax considerations, margin requirements, commissions, transaction costs or other factors. These considerations may significantly affect the economic consequences of any transaction and should be carefully considered before trading in options contracts. In addition, before buying or selling options, determine whether the specific transaction is right for your financial situation, investment objectives, experience, and risk tolerance.

No statement on this site should be construed to be a solicitation or recommendation to purchase or sell any security or to provide any investment advice. Options involve risk and are not suitable for all investors. For more information, read the "Characteristics and Risks of Standardized Options". For a copy, click here.

There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.

The IB Option Calculator.

About The IB Option Calculator.

Designed to help investors quickly compare market and theoretical prices for undervalued and overvalued trading opportunities, the IB Option Calculator uses a binary tree algorithm with option model inputs to determine the theoretical price of an option. Users can quickly modify the inputs to see how changes in the markets may affect the option’s price. In addition, the calculator displays the Greek risk measures associated with the user inputs, to help investors understand the risk of an option position and provide guidance on the hedging of an option’s risk.

Download Details.

Company: Interactive Brokers Version: 1.0 License: Freeware File Size: 375K URL Type: Download Download ID: 19852.

System Requirements.

Mac OS X 10.4 or later.

Apple is providing links to these applications as a courtesy, and makes no representations regarding the applications or any information related thereto. Any questions, complaints or claims regarding the applications must be directed to the appropriate software vendor.

Probability Lab.

Probability Lab offers a practical way to think.

about options without the complicated mathematics.

This page introduces the following concepts:

PROBABILITY DISTRIBUTION (PD)

The first concept to understand is the probability distribution (PD), which is a fancy way to say that all possible future outcomes have a chance or likelihood or probability of coming true. The PD tells us exactly what the chances are for certain outcomes. For example:

What is the probability that the daily high temperature in Hong Kong will be between 21.00 and 22.00 Celsius on November 22 next year?

We can take the temperature readings for November 22 for the last hundred years. Draw a horizontal line and mark it with 16 to 30 degrees and count how many readings fall into each one degree interval. The number of readings in each interval is the % probability that the temperature will be in that interval on November 22, assuming that the future will be like the past. It works out that way because we took 100 readings. Otherwise you must multiply by 100 and divide by the number of data points to get the percentages. In order to achieve greater accuracy we would need more points, so we could use data for November 20 through 24.

Let us draw a horizontal line spanning each one degree segment at the height corresponding to the number of data points in that segment. If we used data from November 20 through 24 we would get more data and greater accuracy but would need to multiply by 100 and divide by 500.

These horizontal lines compose a graph of our PD. They indicate the percentage likelihood that the temperature will be in any one interval. If we want to know the probability that the temperature will be below a certain level, we must add up all the probabilities in the segments below that level. In the same way we add up all the probabilities above the level if we want to know the probability of a higher temperature.

Accordingly, the graph indicates the probability for the temperature to be between 21 and 22 Celsius is 15% and the probability that it will be anywhere under 22 degrees is 2+5+6+15=28% and above 22 degrees is 100-28=72%.

Please note that the sum of the probabilities in all segments must add up to 1.00, i. e. there is a 100% chance that there will be some temperature in Hong Kong on that date.

If we had more data we could make our PD more precise by making the intervals narrower, and as we narrowed the intervals the horizontal lines would shrink to points forming a smooth bell shaped curve.

STOCK PRICES.

Just the same way as future temperature ranges can be assigned probabilities, so can ranges of future stock prices or commodities or currencies. There is one crucial difference however. While temperature seems to follow the same pattern year after year, that is not true for stock prices which are more influenced by fundamental factors and human judgment.

So the answer to the question, "What is the probability that the price of ABC will be between 21.00 and 22.00 on November 22?" has to be more of an informed guess than the temperature in Hong Kong.

The information we have to work with is the current stock price, how it has moved in the past and fundamental data about the prospects of the company, the industry, the economy, currency, international trade and political considerations and so on, that may influence people's thinking about the stock price.

Forecasting the future stock price is an imprecise process. Forecasting the PD of future stock prices seems to allow more flexibility, or at least we become more aware of the probabilistic nature of the process. The more information and insight we have the more likely we are to get it right.

OPTIONS AND HOW THEIR PRICES IMPLY A PD.

The prices of put and call options on a stock are determined by the PD but the interesting fact is that we can reverse engineer the process. Namely, given the prices of options, a PD implied by those prices can easily be derived. It is not necessary that you know how and you can skip to the next section, but if you would like to know then here is one method that any high school student should be able to follow.

Assume that stock XYZ is trading around $500 per share. What is the percentage probability that the price will be between 510 and 515 at the time the option expires about a month from now? Assume the 510 call trades at $6.45 and the 515 call trades at $4.40. You can buy the 510 call and sell the 515 call and pay $2.05.

If at expiration time the stock is under 510, you lose $2.05 If it is between 510 and 515, your gain is the average of your loss at 510 of $2.05 and your gain.

at 515 of $2.95 or $0.45 If it is above 515, you make $2.95.

Further assume that we previously calculated that the probability for the stock to be below 510 is 56% or 0.56.*

Provided that options are "fairly" priced, i. e. there is no profit or loss that can be made if the market's PD is correct, then 0.56*-2.05+X*0.45+Y*2.95=0 where X=the probability that the stock will be between 510 and 515 and Y= the probability that it will be above 515.

Since all possible prices occurring have a probability of 100%, then 0.56+X+Y=1.00 gives us 0.06 for X and 0.38 for Y.

*To calculate an entire PD you need to start at the lowest strike and you need to take a guess as to the probability below that price. That will be a small number, so that you will not make too great an error.

If you've read this far then you will also be interested to know how you can derive the price of any call or put from the PD.

For a call you can take the stock price in the middle of each segment above the strike price, subtract the strike price and multiply the result by the probability of the price ending up in that segment. For the tail end you need to take a guess at the small probability and use a price about 20% higher than the high strike. Summing all the results gives you the call price.

For puts you can take the stock price in the middle of each interval below the strike, subtract it from the strike and multiply by the probability. For the last segment, between zero and the lowest strike I would use 2/3 of the lowest strike and guess the probability. Again, add all the results together to get the price of the put.

Some may say that these are all very sloppy approximations. Yes, that is the nature of predicting prices; they are sloppy and there is no point in pretending otherwise. Everybody is guessing. Nobody knows. Computer geeks with complex models appear to the uninitiated to be doing very precise calculations, but the fact is that nobody knows the probabilities and your educated guess based on your understanding of the situation may be better than theirs based on statistics of past history.

Note that we are ignoring interest effects in this discussion. We are also adjusting for the fact that options may be exercised early which makes them more valuable. When calculating the whole PD, this extra value needs to be accounted for but it is only significant for deep-in-the-money options. By using calls to calculate the PD for high prices and using puts to calculate the PD for low prices, you can avoid the issue.

THE PD AS IMPLIED BY THE MARKET and YOUR OPINION.

Given that puts and calls on most stocks are traded in the option markets, we can calculate the PD for those stocks as implied by the prevailing option prices. I call this the "market's PD," as it is arrived at by the consensus of option buyers and sellers, even if many may be unaware of the implications.

The highest point on the graph of the market's implied PD curve tends to be close to the current stock price plus interest minus dividends, and as you go in either direction from there the probabilities diminish, first slowly, then more rapidly and then slowly again, approaching but never quite reaching zero. The Forward Price is the expected price at expiration as implied by the probability distribution.

Click the image above to view a larger version.

The curve is almost symmetrical except that slightly higher prices have higher probability than slightly lower ones and much higher prices have lesser probability than near zero ones. That's because prices tend to fall faster than they rise and all organizations have some chance of some catastrophic event happening to them.

In the Probability Lab you can view the PD we calculate using option prices currently prevailing in the market for any stock or commodity on which options are listed. All you need to do is to enter the symbol.

The PD graph changes as option bids and offers change at the exchanges. You can now grab the horizontal bar in any interval and move it up or down if you think that the price ending up in that interval has a higher or lower probability than the consensus guess as expressed by the market. You will notice that as soon as you move any of the bars, all the other bars will simultaneously move, with the more distant bars moving in the opposite direction as all the probabilities must add up to 1.00. Also notice that the market's PD remains on the display in blue while yours is red and the reset button will wipe out all of your doodling.

The market tends to assume that all PDs are close to the statistical average of past outcomes unless a definitive corporate action, such as a merger or acquisition, is in the works. If you follow the market or the particulars of certain stocks, industries or commodities, you may not agree with that. From time to time you may have a different view of the likelihood of certain events and therefore how prices may evolve. This tool gives you the facility to illustrate, to graphically express that view and to trade on that view. If you do not have an opinion of the PD as being different than the market's then you should not do a trade because any trade you do has a zero expected profit (less transaction costs) under the market's PD. The sum of each possible outcome (profit or loss in each interval) multiplied by its associated probability is the statistically Expected Profit and under the market's PD, it equals zero for any trade. You can pick any actual trade and calculate the expected profit to prove that to yourself. Thus, any time you do a trade with an expectation of profit, you are taking a bet that the market's PD is wrong and yours is right. This is true whether you are aware of it or not, so you may as well be aware of what you are doing and sharpen your skills with this tool.

THE BEST TRADES AND THEIR POTENTIAL CONSEQUENCES.

Please go ahead and play with the PD by dragging the distribution bars below. We display combination trades that are likely to have favorable outcomes under your PD. You can specify if you would like to see the "optimal trades" that are a combination of up to two, three or four option legs. We will show you the three best combination trades along with the corresponding expected profit, Sharpe ratio, net debit or credit, percentage likelihood of profit, maximum profit and maximum loss and associated probabilities for each trade, given your PD, and the margin requirement.

The best trades are the ones with the highest Sharpe ratio, or the highest ratio of expected profit to variability of outcome. Please remember that the expected profit is defined as the sum of the profit or loss when multiplied by the associated probability, as defined by you, across all prices. On the bottom graph you will see your predicted profit or loss that would result from the trade and the associated probability, corresponding to each price point.

The interactive graph below is a crude simulation of our real-time Probability Lab application that is available to our customers. Similarly, the "best trades" are displayed for illustrative purposes only. Unlike in the actual application, they are not optimized for your distribution.

When you like a trade in our trading application, you may increase the quantity and submit the order.

Free Probability Lab.

In subsequent releases of this tool we'll address buy writes, rebalancing for delta, multi-expiration combination trades, rolling forward of expiring positions and further refinements of the Probability Lab.

Please play around with this interactive tool. As you do so, your understanding of options pricing and your so called "feel for the options market" will deepen.

Interactive Brokers ®, IB SM , InteractiveBrokers ®, IB Universal Account ®, Interactive Analytics ®, IB Options Analytics SM , IB SmartRouting SM , PortfolioAnalyst ® and IB Trader Workstation SM are service marks and/or trademarks of Interactive Brokers LLC. Supporting documentation for any claims and statistical information will be provided upon request. Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

The risk of loss in online trading of stocks, options, futures, forex, foreign equities, and bonds can be substantial.

Options involve risk and are not suitable for all investors. Before investing in options, read the "Characteristics and Risks of Standardized Options". For a copy visit theocc/about/publications/character-risks. jsp. Before trading, clients must read the relevant risk disclosure statements on our Warnings and Disclosures page - interactivebrokers/disclosures. Trading on margin is only for sophisticated investors with high risk tolerance. You may lose more than your initial investment. For additional information regarding margin loan rates, see interactivebrokers/interest. Security futures involve a high degree of risk and are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading security futures, read the Security Futures Risk Disclosure Statement. For a copy visit interactivebrokers/disclosures. There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.

INTERACTIVE BROKERS ENTITIES.

is a member NYSE - FINRA - SIPC and regulated by the US Securities and Exchange Commission and the Commodity Futures Trading Commission. Headquarters: One Pickwick Plaza, Greenwich, CT 06830 USA.

Is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and Member - Canadian Investor Protection Fund. Know Your Advisor: View the IIROC AdvisorReport. Trading of securities and derivatives may involve a high degree of risk and investors should be prepared for the risk of losing their entire investment and losing further amounts. Interactive Brokers Canada Inc. is an execution-only dealer and does not provide investment advice or recommendations regarding the purchase or sale of any securities or derivatives.

Registered Office: 1800 McGill College Avenue, Suite 2106, Montreal, Quebec, H3A 3J6, Canada.

ABN 98 166 929 568 is licensed and regulated by the Australian Securities and Investments Commission (AFSL: 245574) and is a participant of ASX, ASX 24 and Chi-X Australia. Registered Office: Level 40, Grosvenor Place, 225 George Street, Sydney 2000, New South Wales, Australia.

is authorised and regulated by the Financial Conduct Authority. FCA register entry number 208159. [fsa. gov. uk/register/home. do] Office: Level 20 Heron Tower, 110 Bishopsgate, London EC2N 4AY.

is a member of NSE, BSE [sebi. gov. in]. Regn. No. NSE: INB/F/E 231288037 (CM/F&O/CD); BSE: INB/F/E 011288033 (CM/F&O/CD); NSDL: IN-DP-NSDL-301-2008. CIN-U67120MH2007FTC170004. Registered Office: 502/A, Times Square, Andheri Kurla Road, Andheri East, Mumbai 400059, India. Tel: +91-22-61289888 / Fax: +91-22-61289898.

商号：インタラクティブ・ブローカーズ証券株式会社。 金融商品取引業者：関東財 務局長（金商）第187号。 加入協会：日本証券業協会 一般社団法人金融先物取引業 協会。 お問い合わせ先：カスタマー・サービス（03-4588-9700 平日8：30-17： 30）。 登録所在地: 〒 103-0025 東京都中央区日本橋茅場町三丁目2番10号 鉄鋼 会館4階.