does anybody manage a book of options in interactive brokers

sle · Dec 7, 2012

Quote from 2rosy:

Here's a free app that can do some pricing, cones, and curves. Feature requests welcome; integration with ib is possible.

How do you calculate the forwards/drops, using the OTM calls and ITM puts on the chain and bootstrapping?

Kevin Schmit · Dec 7, 2012

Quote from 2rosy:

Here's a free app that can do some pricing, cones, and curves. Feature requests welcome; integration with ib is possible.

Thanks. Looks interesting.

You've put up a number of free apps. Are you, at some point, going to release commercial versions?

2rosy · Dec 7, 2012

Quote from Kevin Schmit:

Thanks. Looks interesting.

You've put up a number of free apps. Are you, at some point, going to release commercial versions?

well free is ... free. meaning all the not so fun stuff is left off. If there is any way I can recoup my time in providing installers, docs, support I would

2rosy · Dec 7, 2012

Quote from sle:

How do you calculate the forwards/drops, using the OTM calls and ITM puts on the chain and bootstrapping?

I wrote this mainly to play around with QT. All the calculations are done using quantlib.

sle · Dec 7, 2012

Quote from 2rosy:
All the calculations are done using quantlib.

I am sorry, being a bit thick here. Did you write a dividend curve stripper based on quantlib functionality or are you trying to tell me that quantlib contains a pre-packaged dividend curve stripper?

Sundog · Dec 8, 2012

I use IB Risk Analysis and sth. similar like optionstar to go over new ideas.
I use the Eurex Strategy Master, costs roughly 20 EUR.

Open up an option chain, set up a strategy order(combo), right click on the B/A price, then "check risk". Immediately go on "view details". I dont use the first graph.
Play with the tools, use initally sth. simple like a straddle and see how IB graphs it, etc.
Honestly IB Risk Analysis works, just get used to it and take some online training from IB. Keep it simple.
I know, it`s not optimal, but I try to keep it simple and it does the job.

Brgds Sundog

2rosy · Dec 8, 2012

Quote from sle:

I am sorry, being a bit thick here. Did you write a dividend curve stripper based on quantlib functionality or are you trying to tell me that quantlib contains a pre-packaged dividend curve stripper?

quantlib provides the dividend curve; you just need to pass in the yield. basically you create a process() and option() and engine()

Code:

dividendYield = FlatForward(settlementDate, 0.00, Actual365Fixed())
process = BlackScholesMertonProcess(QuoteHandle(underlying),
                                            YieldTermStructureHandle(dividendYield),
                                            YieldTermStructureHandle(riskFreeRate),
                                            BlackVolTermStructureHandle(volatility))
option = VanillaOption(payoff, exercise)
option.setPricingEngine(AnalyticEuropeanEngine(process))

sle · Dec 8, 2012

Quote from 2rosy:
quantlib provides the dividend curve; you just need to pass in the yield.

Got it now - you expect the user to provide the dividend yield. I was kind-off thinking that you strip a discrete dividend curve from the option chain and the user only has to provide the dividend dates. That's the "right" way, I can post an excel example for a single slice so you can see the difference in implied vols and more importantly, Greeks. I am pretty sure quantlib provides all of the tools necessary to make that calculation, but i can understand if it's a pain to implement. In fact, ideally you should do a two-tier calculator where you calculate the borrow rate for non-dividend expirations first and then use that + interest rate (OIS or Ts these days) to do a second pass and calculate discrete dividend "drops" for the days of the dividends.