IB Portfolio Theta
- Thread starter ET180
- Start date
Robert Morse
Sponsor
Theta is a dollar value of the estimate of decay per day. Units are cash money,
If you float your cursor around some, you'll find IB also describes it as
position theta * number of positions held.
Same difference. And so, "Net change in value of portfolio value over time measured in days"...
Also, as a small note, because the position theta components are all in $/day, they are all additive over all portfolio positions, regardless of underlying or expiry. "Yayyyyy!" This is in contrast, of course, to the other portfolio greeks...
If all holdings remained unchanged in price and volatility on close the next day, you account would change by that theta number in dollars...in theory.
Thanks everyone, that's what I thought. I googled the definition, but surprisingly, IB did not bother to mention the units of time decay. What good is providing a measurement without units?
https://ibkr.info/glossary/171
https://ibkr.info/glossary/171
Just to clarify, there is the theta of a specific option strike, the position theta of a line-item contract (for a constructed spread), and the portfolio theta of an actual position total -- all of which are in TWS Portfolio data, and may also be available in "IBKR Mobile".
As far as that "Glossary" -- it's an embarrassment and a stain on IB. Period. (I would write it off as an artifact of history. IB's retail effort has never been their focus...... in some places, it still shows.)
While I agree that IB has atrocious documentation, the other side of that coin is they roll out features faster than they can document them. And the calculation of theta probably falls into the realm of "ordinary industry standard" that wouldn't necessarily merit specific documentation in the context of IB.
TWS has been around for a long while -- the "features" IB has been rolling out (for years) have been to assuage a retail crowd, not the professional/institutional crowd around which TWS was born. (Look at the T/A "Studies" portion of a chart, for example. It used to be a dozen or so choices of well-used standards. Now, it's mostly faddish crap, and the old/reliable standards are hidden in a repetitive, noisy crowd.) [[A corporate-level exception here are the marvelous multi-account/control and vanilla/whitebox abilities -- right down to tax documentation, asset allocations, etc. WOW. "A++" material.]]
As far as "ordinary industry standard" .... No.
I'm sure you've seen yourself, BnT, there are any number of pieces of TWS info that do not match published websites or your own internal calculations, but if you look for specifics from IB for an answer, you're SOL. This applies to anything from volatility calculations to multi-day Index averages to.... you name it. "It's a mystery!" is not a good way for them to respond.
I routinely consult/laugh with a fellow-long-time-TWS user, about delta figures for specific strikes that appear on our screens. This is delta we're talking here: one of the most-used figures in all of trading. And yet, we have grown used to having tenths of delta differences between our TWS set-ups -- regardless of versions run, regardless of underlying. I refer to that as a decision-making-wide gap -- which is to say, if you roll a position at a |0.25| delta, and your buddy shows 0.30....... Holy shit!
Now, delta is computed by the local machine -- it is not delivered from IB servers, so that's a software/signal question. But if you had a solid *equation* showing the *specific* inputs to IB's TWS delta calculation, you could prove/disprove the observed figure right on your own screen. Well, "Good Luck with that." because you won't find that calculation -- nor many others, in TWS documentation. "It's a Mystery...."
You know me to be an IB fan -- but it's because TWS was first a *trading* platform, and I'm just used to 'rolling {my} own' for analysis. But that doesn't mean I am blind to TWS faults -- which are mainly in the retail-oriented analytics fashion/fad moves that some call "features."
Now, just to bring us back to the OP, "I would encourage a certain discretion" in use/reliance upon IB/TWS/Mobile-provided strike, position, or portfolio thetas/etc.. Know it backwards and forwards, know what it should be, and have an out for those occasions when the numbers appear whacked.
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Then if it's an industry standard, why did IB bother writing the definition in the first place?
I'm pretty happy with IB and the only thing I can complain about is sometimes when I load the option chain on my "IBKR Mobile" or the IB mobile app, sometimes parts of the chain won't load. I may get quotes for calls, but not puts or the other way around. And it's not just because I use an Android (Galaxy S7). My friend with an iPhone has the same problem.
Huh...those are really good points. I'm always a bit of a tinkerer, so rather than consult documentation I just backed into all the calculations and keep checking on them to keep TWS honest (fool me once...). It's easy to forget how much of this is taken for granted.TWS has been around for a long while -- the "features" IB has been rolling out (for years) have been to assuage a retail crowd, not the professional/institutional crowd around which TWS was born. (Look at the T/A "Studies" portion of a chart, for example. It used to be a dozen or so choices of well-used standards. Now, it's mostly faddish crap, and the old/reliable standards are hidden in a repetitive, noisy crowd.) [[A corporate-level exception here are the marvelous multi-account/control and vanilla/whitebox abilities -- right down to tax documentation, asset allocations, etc. WOW. "A++" material.]]
As far as "ordinary industry standard" .... No.
I'm sure you've seen yourself, BnT, there are any number of pieces of TWS info that do not match published websites or your own internal calculations, but if you look for specifics from IB for an answer, you're SOL. This applies to anything from volatility calculations to multi-day Index averages to.... you name it. "It's a mystery!" is not a good way for them to respond.
I routinely consult/laugh with a fellow-long-time-TWS user, about delta figures for specific strikes that appear on our screens. This is delta we're talking here: one of the most-used figures in all of trading. And yet, we have grown used to having tenths of delta differences between our TWS set-ups -- regardless of versions run, regardless of underlying. I refer to that as a decision-making-wide gap -- which is to say, if you roll a position at a |0.25| delta, and your buddy shows 0.30....... Holy shit!
Now, delta is computed by the local machine -- it is not delivered from IB servers, so that's a software/signal question. But if you had a solid *equation* showing the *specific* inputs to IB's TWS delta calculation, you could prove/disprove the observed figure right on your own screen. Well, "Good Luck with that." because you won't find that calculation -- nor many others, in TWS documentation. "It's a Mystery...."
You know me to be an IB fan -- but it's because TWS was first a *trading* platform, and I'm just used to 'rolling {my} own' for analysis. But that doesn't mean I am blind to TWS faults -- which are mainly in the retail-oriented analytics fashion/fad moves that some call "features."
Now, just to bring us back to the OP, "I would encourage a certain discretion" in use/reliance upon IB/TWS/Mobile-provided strike, position, or portfolio thetas/etc.. Know it backwards and forwards, know what it should be, and have an out for those occasions when the numbers appear whacked.
I actually have an ETrade account in addition to IB, in no small part because of mobile options chains. (Lol, use TWS to look at the chains before entering trades on ETrade....use ETrade mobile to look at the chains to enter trades on IB
).Another reason to use ETrade is they actually have some pretty nifty options research tools (my only gripe is that you can't adjust the strategy cost basis--it will always show you the taker side of the BxA).
And, depending on your trading size, annual volume, and style, ETrade can be close to IB pricing (though, you give up some "liquidity advantage" that you have a bit more control with TWS).
And if there's anything you don't understand, there's a helpful 800-number you can call into without having to hold. (As a happy TWS user, I think this is called getting what you pay for)