I am developing a vertical spread trading model. Looking for a way to calculate the stop loss price on the underlying asset for a given vertical spread at an arbitrary time t.
Using Black Scholes, I can find the predicted option price given the stock price and other inputs.
But finding the stock price for a given credit spread and on two options is different because:
- Need to find stock price from options.
- There are infinite number combinations of options prices for any given credit.
Open a credit spread 940/950 on AMZN trading at 894.88 with volatility 25.415% and 40 days remaining. The credit is $260.
According to this calculator, if the price rises to 920 on the first day, the loss is $106.
How can I calculate this quickly?
Currently I am calculating the loss at each price until I find the given loss, but this is very inefficient. It takes about 100 ms per credit spread for all days. I would like to filter 250 option chains, with each having perhaps 20 spreads. So about 5,000 credit spreads.