Options Trading – Excel Spreadsheet

In this post, I will be explaining how the use of excel and similar tools can be beneficial for options trading. At the end of the article, I’ve provided a link to the video tutorial for options pricing in excel using MarketXLS. But before starting let us understand why beginners must be extra careful with options trading and if there a way to simplify options trading.


Options Trading – Can It Be Made Simpler?

Options trading can be extremely lucrative. When trading options, it’s possible to profit if stocks go up, down, or sideways. You can use option strategies to cut losses, protect gains, and control large chunks of stock with a relatively small cash outlay. Also, options provide many ways to protect and hedge your risks against volatility and unexpected movements in the market.

However, there is a learning curve you must go through first. It is possible to lose more than the entire amount you invested in a relatively short period of time when trading options. That’s why it’s so important to proceed with caution.

Also, many traders who try options suffer losses in the beginning. But it doesn’t have to be that way for you. Nowadays, there are tools available through which you can keep a track of all the options activity and also assist with the most common problems that I see options traders face.

Why Use Tools Such as ExcelSome of the strategies like covered call, protective put, bull call spread, etc. can help you to make money and limit risk. But in any exchange, there are many options available at different prices and different strike rates. If you want to analyze the payoff vs risk for each of them, it becomes cumbersome and tiring to calculate the max profit/max loss for each option/strategy. Tools such as Excel with MarketXLS enabled can help in analyzing the strategies.

Benefits of using ExcelOptions are a completely different asset class than stocks, they move differently, and they trade differently. Traditional off-the-shelf indicators are difficult to understand and analyze for someone starting in options trading and hence, they are more likely to lose money to sophisticated traders armed with more powerful tools. Times have changed. Today’s clever investors tend to focus their attention on analyzing subtle distortions in volatility and identifying anomalies in derivate prices.

Technological advances make it very difficult for the investing public to compete in short-term trading.During the past few years, Excel has evolved into a powerful analytical tool that can be used for complex statistical analysis and to create new indicators and custom charts. Few traders understand how to exploit these capabilities. Traders can use the power of Excel to gain an advantage in the marketplace by designing their own analytical tools and indicators. The easiest way to do this is by enabling MarketXLS in excel.

Options trading - Excel spreadsheet benefits

By using this feature, you can crunch data, analyze it, and get answers to the most complex questions thereby resulting in pushing orders.

I have provided a screenshot of the live market of one of the MarketXLS template which is used to track options. By providing the stock symbol you can get details such as strike price, expiry date, days to expire, option greeks, and the last traded price.

You can learn more about tool usage from the video tutorials.

The Bottom LineKeeping a track of all the options and the profit-loss potential for different strategies can be very challenging. Using an already familiar tool such as excel to keep a tab on all options activities can be beneficial to analyze the risk-reward potential. Valuable insights can be achieved from tools such as MarketXLS which also aid to ease the initial learning curve.

DisclaimerNone of the content published on marketxls.com constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The author is not offering any professional advice of any kind. The reader should consult a professional financial advisor to determine their suitability for any strategies discussed herein.