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This paper presents a systematic methodology for analysing options trading, integrating user inputs with historical stock data to facilitate informed decision-making. The process begins with the collection of user-specified stock tickers and expiration dates, followed by the retrieval of historical price data to assess past stock performance. Key components of the analysis include calculating historical volatility, fetching the option chain, and filtering options into put and call categories. The methodology employs the Black-Scholes model to estimate fair option prices, which are further evaluated by calculating expected returns. The analysis culminates in the ranking of the top three put and call options based on their expected returns, providing users with actionable insights. Additionally, the methodology incorporates visual representations of stock prices and option data, alongside calculations of option Greeks to assess risk sensitivity. This comprehensive approach empowers traders to navigate the complexities of options trading with a clear understanding of potential outcomes and associated risks.
Haya Jafri (Mon,) studied this question.