Determining Option Price Probabilities Using Geometric Brownian Motion

More information can be found in my blog post on this topic.

The tool below simulates stock price paths using Geometric Brownian Motion for price fluctuations and Monte Carlo simulation. After a path is generated for each simulation, the final prices are aggregated and processed to determine the percentage of prices above, below, and between the high and low strike prices.

Entering the Expiration Date before entering the Days of Historical data to use will automatically determine a number of days of data to use (note that this will not happen if the Days of Historical Data field is not blank). The amount of data used will effect the calculation of historical volatility. Therefore using fewer days for near expiration dates and more data for expiration dates further in the future will likely be prudent.

The ticker symbol list, high strike prices, and low strike prices are comma delimited and correspond with one another. For example, the first symbol, first high strike, and first low strike are the parameters for one simulation to determine the likliehood of the stock falling between those two strikes. Put another way, the parameterization is positional in these threes lists.