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You could also just plug it into an options calculator and mess around with the three variables - Underlying Price, DTE and IV and you'll see what it takes to get that option down to 5.00. Some options calculators have graphics, some don't. Of the ones that do, it's nice to have a 'slider' so you can quickly move a variable and see the payoff diagram change shape (and the price of your option rise or fall).
EDIT - scratch the first suggestion below from the Options Industry Council. While they have the binomial model and a dropdown menu for futures, they don't let you enter a custom DTE. It's just populated with the 3rd Fridays for stock options.
It will open on a 'tools & resources' tab, but you need to mouseover to the white tab heading, select calculators > advanced > binomial American model. Zero out anything related to dividends, make the interest rate zero or no more than .025% (it doesn't really matter).
The calculator you'll be using is from ivolatility.com. It's the same one they provide to their Advanced Futures Options customers, except the paid version has futures prices and DTE pre-loaded.
You can also register and use for free the calculator and other CME futures options related tools at Quikstrike.
Basically, you just want to make sure you're using a calculator that handles American style (early exercise) options properly. There are dozens of them online and most investment sites, or brokerages have them.
Yes, when I clicked on the ivolatility free, basic calculator and plugged natural gas data into the pre-populated Microsoft fields, the results came back OK compared to my standalone futures options calculator.
I've purchased the Hoadley Excel add-in. Tons of value but you have to spend some time with it and customize it. It's a good learning tool. Works better (automated chain loading) with stock options than futures options.
I am a little late on this thread....BUT one of the best tools for options, greeks, "what if" calculations and much more is via CQG. Bad news CQG integrated client is approx. $700 per month, the good news is that they came out with CQG Q trader for $40 per month which has a LOT of the same option features.
Agree on CQG Q-Trader features and price/value: $40/mo plus 25 cts/contract. The real time ATM IV is nice, so is RTD (export) and some basic option modeling, but they really need to work on their vol skew graphs.
A note for those using the original BS European stock option pricing model to price American style futures options: You'll lose some precision in the model's outputs. It's probably not going to be a big deal if you're not trading large quantities, but you may want to compare the two across various scenarios to see if it's close enough for you.
