NOTE: This document is a modified description of our legacy Options Level 1 Fair Value to Market Value Hedge Ratio solution still featured with Level 2's Price Analyzer charts. It is an alternative method of determining an option pair's forward value. However, the recomended method to forward value an option is implied pricing using implied volatility's in combination with sticky decay processes that are the central feature of Options Level 2's Implied Pricing Model. The recommended method to model forward spot values is to send market straddles from the CBOE Parser View to Options Level 2's Implied Pricing Model. The American and European Models (closed form) best forcast near the money options from 2 to 2 1/2 weeks out from the market date. Deep position prices can only be serviced by the American and European Models. The 3rd week out from the market chain's date, the convergence model delivers the most reliable forecast. After 4 weeks, near the moneys spots are better serviced by Level 2's [sticky] decay (theta/delta). However, you may find utility in the hedge ratio approximations. They are suprisingly close to backtested outcomes, but they are not the generally accepted method to value options.

Although this description is useful, it does not include all the features or items available on the right click popup menu. For example, Level 2's CBOE Parser features implied volatility's, conversion and reverse conversion yields. Level 2 syncs the last bid ask for the option with the corresponding stock quote. The Level 2 CBOE Parser right click menu offers a few more services, including a service to send a selected straddle to the Implied Price Model for price / time forward spot matrix resolutions. For more information you can download the Options Level 2 User Documentation on the main page.