Tool
The overnight call calculator
You hold a call overnight. The stock moves and implied volatility changes. See what the call is worth the next morning and where the change came from.
A call is a contract that lets you pay a set price per share for 100 shares, any time until a set date. The contract itself has a price, called the premium. It is worth more when the stock is higher. The set price is the strike. The set date is the expiration. Implied volatility is how big a stock move the call's price has built in, quoted as a yearly percentage.
Step 1 · Pick a night
The call has a $105 strike and 7 days to expiration, on a $100 stock. Overnight the stock rises 4%, implied volatility falls from 80% to 45%, and 1 day passes.
Step 2 · Change the night
The example: an earnings beat
The call has a $105 strike and 7 days to expiration, on a $100 stock. Overnight the stock rises 4%, implied volatility falls from 80% to 45%, and 1 day passes.
Stock +4%. Call −21%.
Worth $2.46 before and $1.94 the next morning. That is −$52 on one contract of 100 shares.
Where the change came from
Why. The stock went the call's way. But the call's price already had a big move built in. When implied volatility fell from 80% to 45%, that part of the price left. That part was bigger than the gain from the stock.
What was priced in. At 80% implied volatility, this call was priced for a stock move of about ±4.2% in one day. You set +4%.
The call is worth $2.46 again if the stock moves +5.1% from its starting price.
As of the numbers you setSource computed in this page. Illustrative, not a quote.
Step 3 · Change the call
The call
These are invented example numbers. Type in any box. Implied volatility is the IV column on an option chain.
Three things to find · 1 of 3 found
Move the sliders until each one happens.
- ✓The stock rises and the call still loses.Found. That is implied volatility leaving the price.
- 2Nothing moves and the call loses anyway.Hint: pick the quiet night.
- 3The stock falls and the call gains.Hint: push implied volatility well above where it started.
The whole night at a glance
Every stock move against every volatility.
Each cell is the call's change by the morning. Rows are where implied volatility (IV) ends up. The outlined cell is the night you set, when it is on the grid.
| stock −8% | stock −4% | stock flat | stock +4% | stock +8% | stock +12% | |
|---|---|---|---|---|---|---|
| IV stays 80% | −81% | −56% | −12% | +54% | +145% | +257% |
| IV to 64% | −93% | −77% | −42% | +20% | +111% | +229% |
| IV to 45% | −99% | −94% | −73% | −21% | +72% | +201% |
| IV to 32% | −100% | −99% | −90% | −49% | +48% | +189% |
As of the call you setSource computed in this page
How it is computed
Method. Black-Scholes price of a European call, with no interest rate and no dividend. Volatility is annualized and days are calendar days over 365. The change is split in order: the stock moves first, then volatility changes, then the days pass. The one-day priced move is implied volatility divided by the square root of 365.
Limits. Real options are American style, carry bid and ask spreads and rarely change volatility by one number. Results change with every input and with the market. This is a hypothetical illustration of option pricing math.