Binomial Option Pricing

Chart every path a stock could take, then work backward to price the option today. Add steps and watch the lattice converge to Black–Scholes.

Binomial Option PricingLive

a lattice of possible futures

Controls

Presets

Spot price S

Strike K

Volatility σ

Time to expiry (yr)

Tree steps

The binomial model builds a tree of up and down moves, then works backward from expiry using risk-neutral probabilities to price the option today. Add more steps and it converges to the Black–Scholes value. Educational tool, not financial advice.

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Data Inspector

Call price$11.24

Up factor u1.133

Risk-neutral p0.509

Governing equation

p = \frac{e ^{r Δ t} - d}{u - d} = \frac{e ^{0.04 \cdot 0.250} - 0.882}{1.133 - 0.882} = 0.509, V_{0} = e^{- r Δ t} [p V_{u} + (1 - p) V_{d}] = $11.24

Reading this result: Near the money the price is almost all time value; it rises with volatility (σ = 0.25) and time (T = 1.0yr) because both widen the cone of possible ending prices.

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How it works

The binomial model discretizes price movement into up and down steps, assigns risk-neutral probabilities, and values the option by backward induction from expiry. It handles early exercise and other features that closed-form models cannot, and converges to Black–Scholes as steps increase. Educational tool, not financial advice.

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Frequently asked questions

Is this binomial option pricing model tool really free?▾

Yes. Binomial Option Pricing runs entirely in your browser using your device's own compute, so local use is free forever. You only pay Compute Tokens if you scale a job to the cloud.

Do I need to install anything?▾

No. Everything runs client-side in a modern browser — no downloads, no license, no account required to start.

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Create a free account to save projects, and use a shareable embed or minted DOI to publish a live, interactive version anywhere.

How accurate are the results?▾

The solver uses established numerical methods, but results are for research and educational purposes and should be validated against experiment or professional review before you rely on them.