What are Theoretical Prices
The theoretical prices are prices calculated by beeTrader’s internal engine based on multiple parameters and in particular influenced by implied volatility. Each strike of each expiry of a chain option is priced on the basis of its own volatility, the various strikes draw a surface, defined Volatility Surface .
Use of Theoretical Prices
The theoretical prices are used in the Options Strategy and are always blue, unlike the prices received in real time which are white.
The theoretical prices are always used in the What-If , precisely because this function aims to provide prices for options in future conditions hypothesized by the user.
They are also used in the General and Comparison form if the option link has not been activated, again the option is not listed or closed to the trading market. It is also possible to set the theoretical price to take over the real one if the last tick received goes back a long time. This and other settings are available in Strategy Settings .
Modification of Theoretical Prices
As previously mentioned, the theoretical pricing calculation engine is based on Volatility Surface. Therefore, in order to have reliable theoretical prices, it is good practice for the volatility surface to be updated. The acquisition from the market of a new surface of volatility must be made in open markets as explained in the section Volatility Surface of the manual.