Ask the Institute

DATE: March 7, 2002

How do you get the theoretical value of an option that expires in 3 or 4 years?

The Options Toolbox software calculates theoretical values for long-term (LEAPS) options using information supplied by the user. This software can be downloaded free of charge from the Cboe website at

Please be aware that the calculation of option "theoretical values" is subjective. Calculated option values must be interpreted very carefully. As the time period increases, for example, the interest rate component increases in importance. Since interest rates are likely to change in the next 3-4 years, option theoretical values are likely to change as well. If you are not familiar with the process of estimating theoretical values of options, be sure to read the various educational sections in The Options Toolbox that explain the risk factors in making these calculations.