Options Analysis Program

aphexcoil · Jun 2, 2003

I've decided to invest some time in writing some options analysis software that is compatible with Interactivebrokers. I've just started writing it, but if any of you trade options for hedging / speculation purposes, please give me some ideas to add to the program.

We need better trading tools.

Trajan · Jun 3, 2003

Is a beta avilable for download? I don't use IB for option trading, but I do have an account there to give my opinion.

A couple of ideas:

1. A button to automatically hedge deltas with stock. If the program shows your long 500 deltas, you could hit a button that would load up a sell order of 500 of the common.

2. IVs of both the bid and ask.

3. Calculate the implied vols of spreads.

4. Graph of the skew.

5. Cost of carry of each strike.

6. The synthetic stock market at each strike.

7. Set the interest rate for each month.

8. Be able to set the vol for each option, at each strike, in every month.

9. Have a couple of different pricing models available for use.

Some of these would be invaluable, others just nice features I would use. If you could do half, the software would be well on its way to be being better than any others typically available to retail traders. I could think of others things as well.

aphexcoil · Jun 3, 2003

I'll PM you and let's discuss it. Thanks for the ideas -- I'll probably get something together within a week or so (to play with).

aphexcoil · Jun 4, 2003

This is very shit looking right now, but I just coded it really quickly tonight. Anyway, here is the picture:

What I'd like to do is give the user the ability to quickly do anything, while having the computer show the user the profit / loss curves real-time as data changes within IB (or from another source).

The implied volatility will be changing, especially if the stock suddenly moves. I haven't watched this long enough to see how that works, but the real benefit would be having the computer take out a lot of the guess work for speculating / hedging. For instance, if MSFT is moving around and all the option prices on MSFT's chain are also changing, the computer would keep the data current at all times.

cvds16 · Jun 4, 2003

Greeks split up by expiration and total would also be nice.

Trajan · Jun 4, 2003

Quote from cvds16:

Greeks split up by expiration and total would also be nice.

Yep, another good idea.

Quote from aphexcoil:

What I'd like to do is give the user the ability to quickly do anything, while having the computer show the user the profit / loss curves real-time as data changes within IB (or from another source).

The implied volatility will be changing, especially if the stock suddenly moves. I haven't watched this long enough to see how that works, but the real benefit would be having the computer take out a lot of the guess work for speculating / hedging. For instance, if MSFT is moving around and all the option prices on MSFT's chain are also changing, the computer would keep the data current at all times.

Most of the time, you want the implied volatility to stay static when making greek calculations. Option traders typically want to input their own IVs into the models which is why being able to set the vol for each strike is important. So, while the IV's may change after a sharp move, it would be better to let the trader change it themself. This could be an option in the software, either use the atm implied vols or those entered by the trader.

Showing profit and loss curves in real time would be great along with being able to simulate trades into the position as well. If the simulation can be done quickly, it would add tremendous value to the software. An idea would be to have the option chain, the position chart and somewhere in there the current position, all on the same page. With a simple click of the button, you should be cancel all the simulated trades and start back at zero or to the current position or a saved simulated position.

cvds16 · Jun 4, 2003

Quote from Trajan:

Most of the time, you want the implied volatility to stay static when making greek calculations. Option traders typically want to input their own IVs into the models which is why being able to set the vol for each strike is important. So, while the IV's may change after a sharp move, it would be better to let the trader change it themself. .

This is indeed important and while we are at it, the ultimate option tool would also be able to calculate the greeks at different intervals away from the current price for analysis. For example: 5 times 2% up and 5 times 2% down.

Trajan · Jun 4, 2003

Quote from cvds16:

This is indeed important and while we are at it, the ultimate option tool would also be able to calculate the greeks at different intervals away from the current price for analysis. For example: 5 times 2% up and 5 times 2% down.

Ideas for intervals:

1. percentage

2. strikes

3. user defined interval, .50, 1, 2, 5, etc...

4. It would be cool if a standard deviation interval could be included either using the IV of the atm or the trader determined vol.

I typically base my trades off of 3 and 4.

white17 · Jun 4, 2003

All the above plus two more; I have asked IB for a feature that will allow you to net two or more positions in real time rather than just the overall PNL column and have the net continuously update. 2. A realtime model similar running of the IV column of TWS that is dynamic. That is so that you don't have to refresh plot all the time.....a continuous theoretical value.

hardrock375 · Jun 5, 2003

1. Streaming order book with the inside market and size across all exchanges for a given option.
2. Size-weighted price and IV across all exchanges representing the inside market for a given option (Please PM me if you want to know what I mean here).