This is a tool that calculates the implied volatility of a European (style) option, using the Black-Scholes model. In addition, it calculates the call price, the put price or the dividend yield, depending on which of the other two have been inputted.

For these calculations, it is necessary to supply the following compulsory information:

• The stock price.
• The strike price, or exercise price, which is the price at which the underlying stock can be purchased or sold upon exercise of the option.
• The term in years of the option contract.
• The annualised, continuously compounded, risk-free interest rate. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).

In addition, it is necessary to input two of the following in order to calculate the implied volatility and the remaining price or yield:

• The annualised, continuously compounded, dividend yield. This is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
• The call price of the option.
• The put price of the option.

Associated tool link: http://www.coggit.com/tools/implied_volatility_tool.html