Rupeezy calculates option Greeks and implied volatility using the Black model, also known as Black-76. It is a variant of the Black–Scholes option pricing model that prices options from futures rather than from the spot price.
In the Black model, we:
- Use future prices instead of stock prices for stock options
- Use index prices for index options
- Assume no interest rate
- Assume no dividend
Why not plain Black–Scholes?
The Black–Scholes model assumes that the risk-free interest rate and the volatility of the underlying are both known and constant. In the real world neither holds. The RBI can change the interest rate, so whatever single rate you feed the model is an assumption, and it may already be stale.
The Black model sidesteps this by using the forward price as the underlier in place of the spot price. A futures price already carries the market's own view of interest rates and dividends inside it, so the model needs no separate rate or dividend input.
That is what the assumptions above really mean. "No interest rate" and "no dividend" are not saying these things are ignored. They are saying both are already accounted for in the futures price we price from, so adding our own estimate on top would double-count them.
Which price is implied volatility calculated from?
In theory the implied volatility of the CE and the PE at the same strike should be the same number, because both describe the same underlying, the same strike and the same expiry.
In practice the two prices are not equally suitable to derive it from. In-the-money options are taxed differently from out-of-the-money ones, and that difference is reflected in what they trade at. An implied volatility worked back from an in-the-money price would therefore carry the tax effect inside it, rather than the market's view of volatility alone.
So at each strike we calculate IV from the price of whichever leg is out-of-the-money: the CE at strikes above the current level, the PE at strikes below it. That single figure is the strike's implied volatility, and it is what you see against both the call and the put on that row.
To see the Greeks on your own positions, see How to check Options Greeks on Rupeezy?