# Put option price equation

It is very easy to make a mistake. If you want to use the Black-Scholes formulas in Excel and create an option pricing spreadsheet, see detailed guide here:. Option Greeks Excel Formulas.

If you don't agree with any part of this Agreement, please leave the website now. All information is for educational purposes only and may be inaccurate, incomplete, outdated or plain wrong. Macroption is not liable for any damages resulting from using the content. No financial, investment or trading advice is given at any time. Home Calculators Tutorials About Contact. Tutorial 1 Tutorial 2 Tutorial 3 Tutorial 4. The formulas for d1 and d2 are: Consider the task of pricing at time 0 a European put option i.

The Black-Scholes-Merton pricing formula is. The other two variables are. It would be nice if we could simply carry out the additions, multiplications, divisions, etc.

The situation is a little more difficult than that, however. It is true we can calculate the numerator of the expression for d 1 , using scalar operations where appropriate, and probabilistic operations to add the last two terms together.

Evaluating the price probabilistically could be a major challenge. A different way of presenting the same problem gives the answer without difficulty. The present value of the strike price is just Xe —rT , an expression that involves only one random variable, r , and can be readily computed. To illustrate, Figure 1 shows the distributions of the present values of X and S T.