The Option Model for the New Millennium.

OSCC to disclose its proprietary option pricing formula despite the economic consequences.

The OSCC Option Model System.

The OSCC Option Model System is composed of a simple formula that is broken up into many parts with a large number of parameters to provide the data we use and to enhance it's accuracy. There are about 240+ named ranges in the spreadsheet.

Definitions for the OSCC Commodity Option Model.
This model will also work for stock options.

All books on options show the option pricing curve. There are two parts to an option price, the time value and the intrinsic value caused by the future. This results in monthly contracts for options. The intrinsic value is not part of OSCC picture, as we are "independent" of the futures. The time value is the measure of the risk in options and is referred to as option premium. We see the time value as strictly option premium. Every strike price under the option curve has some option premium as part of it's value or price. We convert all of these premiums to a "Par Value".
Definition: "Par Value". "Par Values" are calculated by using OSCC Option Tool Program system parameters that vary from day to day. Consider an Aug 124 Call with an indicated value of 39 and a Sep 124 Call with an indicated value of 62. If the Sep 124 Call, after adjusting for time to the same expiration date as the Aug 124 Call, has a value of 39, they are considered to be "On par" with each other. If on the other hand, had the Sep 124 Call had an average of 60, it would have been two ticks under valued as compared to the Aug 124 Call.
Definition: "Premium" When we say premium we mean the total of all these "Par Values" across all strike prices. All the strike prices taken together is the premium coverage. This premium can then be plotted and directly compared between different months of a commodity contract. It varies up and down in both long and short term patterns. These patterns have no relationship to that of the futures. These premiums are completely independent of the futures. See Premium Chart
Definition: "Normalized" Not all contracts have the same number of "active" strike prices with published data. The number of strike prices varies with time, both increasing and decreasing. They also vary with the commodity or stock, and the "underlying future". They all have historical data. Thus a way has to be found to make comparison within a monthly contract, between months and between "underlying futures". OSCC has that method. The OSCC Option Pricing Model has the ability to increase or decrease the number of strike prices and place a value on that strike price, whether or not these are published values. A minimum amount of data is required to start the program. We refer to this process as "Normalizing the Strike Price Range". We use this "normalized strike price range" to get the "Max Premium". To make relative comparisons between "underlying futures" we further "Normalize" the "Max Premium". Thus We have the relative "OSCC Normalized Top Option Premium"
Definition: "Total Dollar" Since the value of an option tick varies greatly and traders are really concerned with their actual investment. We have adjusted the "OSCC Normalized "Max Premium"" to reflect the dollars invested. We refer to this as the "OSCC Normalized Total Dollar Option Premium" or "NTDOP"

What is the OSCC Option Model relative "Normalized Total Dollar Option Premium?

We have always had a hard time explaining the OSCC Option Model. Since We are now going to do 27 products. We have added this paragraph. As you read above we look at the "Max Premium's. This "look" has always been done over a "normalized" option strike price spectrum. We use the OSCCFV program to create any missing strike prices and their option values. This has enabled Us to make direct monthly contract comparisons. With the addition of these products a way had to be found to compare any commodity with another. This was actually fairly simple as we just took into consideration the dollar value of the ticks. We then of course factored everything such that the T-Bond Option Charts had only a small change in them.

What is the OSCC Option Model Normalized Total Dollar Option Premium for a Normalized Future. The (NTDOPFA)?

Since these are options on futures contracts of various values, We then further "normalized" these values as if every futures contract at the close of every day had a value of $100,000.

What is the "Predicted" OSCC Option Model Premium?

The parameters that make this possible, follow patterns that can be tracked and are used to make estimated predictions as to whether current options premiums may rise or fall. This is referred to as the Long Term Outlook Analysis. These estimates are based on whether the current options are over or under priced relative to their historical values. Skilled brokers can interpret this knowledge and select the best possible strategy based on their knowledge of the futures..

So far we have given site users a basic look at our OSCC Option Program. What is shown on our charts is only the "tip of the iceberg" as to it' full capabilities. For addition clarifications see our OSCC Option Program accuracy page.

We also have a new "Chart explanation page" to help explain what these charts show and how to use them.
For a better understanding of what we do please read these pages.
--- About Us What we found that prompted us to develop our option program.
--- The OSCC overview of option trading.
--- The OSCC Option Model.
--- Products
--- The Accuracy of the OSCC Option Model.

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Last Updated on 10/31/2019 By Tom B
As used throughout this web site: 10/31/2019

This site relates to option trading of commodity options and futures with strategies that buy or sell puts and calls either long or short for profit on treasury bonds and notes, Dow Jones Index, soybean products, corn, wheat, oats, rough rice and T-Bond options on the CBT, Chicago Board of Trade through "floor traders". We are also doing 6 currencies from the CME, the Chicago Mercantile Exchange, the Japanese Yen, British Pound, Swiss Franc, the Euro FX (ECU) and the Australian and Canadian dollars. We also do 5 agriculture products, the S&P 500, NASDAQ 100 and Eurodollars related to European and Economic Monetary Union (EMU) interest rates. Commodities are a high risk speculative hedging investment and traders should use brokers for trading contracts who keep their funds and money in accounts with high rates. This site provides free commentary, and technical analysis on commodity futures and option premiums by OSCC from our futures charts and option charts for use by traders. This site no longer provides free quotes, although we do provide a free commodity ticker.