Just like real estate investors compare a property’s price to market comps, options traders need a way to measure an option’s market price against a standard. Without it, it’s hard to know if you’re overpaying or getting a bargain.
Market Chameleon’s tool calculates theoretical values using an option pricing model—then lets you see how those values stack up against real market quotes. If the actual price is much higher or lower than your chosen benchmark, that’s a signal worth paying attention to.
From a stock’s summary page, you can open the Option Chain view. Calls are listed on the left, puts on the right, strikes in the center, and each contract shows its bid and offer.
The Theoretical Values feature overlays a calculated “fair value” for each option, based on a volatility input. You can:
Use the platform’s default “best fit line” to smooth implied volatilities.
Enter your own custom volatility number.
Select from historical volatility measures.
Benchmark against historical median implied volatility for similar contracts.
Volatility is the key driver in any option pricing model. Since you can’t know the future, you make an assumption—and this tool helps you see how that assumption translates into fair value pricing.
Custom Volatility – If you think Google’s volatility will be 20% until expiration, enter “20” and the tool recalculates all theoretical prices. You can instantly see if market prices are far above or below that scenario.
Historical Stock Volatility – Use the stock’s past movement to guide your input:
Last 20 Days – Reflects short-term realized volatility.
One-Year Average – Gives a longer-term baseline.
Historical Implied Volatility – Compare current implied volatility to the historical median for similar options. The IV Percentile tells you where today’s IV sits relative to its past range—80% means it’s higher than 80% of past readings.
When market prices differ significantly from your chosen theoretical value, it’s worth digging deeper. For example:
If your model says an option is worth $0.18 but the market is pricing it at $0.60, you may be looking at a rich premium.
If the IV percentile is high, it means current premiums are historically elevated, which might influence how you approach selling or buying.
The main benefit is speed—you can quickly benchmark multiple contracts without manually crunching numbers. This allows you to focus your energy on contracts that are most out of line with your expectations.
That said, the tool relies on the Black-Scholes model, which—like all models—is an approximation. The output is only as good as the volatility assumption you feed it. No model can predict the future; it’s a guide, not a guarantee.
Market Chameleon’s Theoretical Value Benchmarks put powerful context right in your hands. By comparing market prices to fair values under different volatility scenarios, you can cut through the noise of an option chain and focus on trades that align with your strategy.
?? Explore it for yourself: https://marketchameleon.com/Overview/GOOG/OptionChain/
Financial Disclosure:
The information in this blog is for educational and informational purposes only. It should not be considered investment advice or a recommendation to buy or sell any security. Options trading involves risk and is not suitable for all investors. Always consult with a qualified financial advisor before making investment decisions.