What to make of live options behavior

D

darkshogun

Question from a novice -

I have several relatively delta neutral positions going on a TOS demo (mainly butterflies with calls) that have a theta value of about $10 per day. When the market is open and the options prices are changing, the un-trustable TOS P/L line (as well as the value of the options) fluctuates wildly. It's a little scary. For instance a position that's up about $120 when the markets are closed (and has been going up little by little each day, and which seems to follow the trajectory of the strategy -- at least that's how it appears when the markets are closed and everything isn't jumping around) will jump around from $0 or below, to up to $400 within a matter of seconds, then it'll go back down and back up again, making huge temporary moves in the P/L graph line and in the actual value of the positions. Is this normal? And if it is, is it possible to put it a close order and try to snipe these positions and get out of them early at a high price?(I really doubt it's possible, since the system is rigged anyway). Note: these are SPY and IWM positions and the prices have remained relatively stable with little movement.

With all this craziness, how the hell do you actually trade these live with all the jumping around in prices, if you're trading a complex strategy? This really has me thinking it would be best just to stick with something simpler, like credit spreads or puts and calls, or maybe not trading options at all. Would be nice to be able to execute trades when the markets are closed and things have calmed down.
 
darkshogun said:
Question from a novice -

I have several relatively delta neutral positions going on a TOS demo (mainly butterflies with calls) that have a theta value of about $10 per day. When the market is open and the options prices are changing, the un-trustable TOS P/L line (as well as the value of the options) fluctuates wildly. It's a little scary. For instance a position that's up about $120 when the markets are closed (and has been going up little by little each day, and which seems to follow the trajectory of the strategy -- at least that's how it appears when the markets are closed and everything isn't jumping around) will jump around from $0 or below, to up to $400 within a matter of seconds, then it'll go back down and back up again, making huge temporary moves in the P/L graph line and in the actual value of the positions. Is this normal? And if it is, is it possible to put it a close order and try to snipe these positions and get out of them early at a high price?(I really doubt it's possible, since the system is rigged anyway). Note: these are SPY and IWM positions and the prices have remained relatively stable with little movement.

With all this craziness, how the hell do you actually trade these live with all the jumping around in prices, if you're trading a complex strategy? This really has me thinking it would be best just to stick with something simpler, like credit spreads or puts and calls, or maybe not trading options at all. Would be nice to be able to execute trades when the markets are closed and things have calmed down.
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You are grossly exaggerating the actual fluctuation of the position.
 
changes in the bid/ask in some legs of the spread can cause this. For accurate pricing your better off looking at spreads when the market is calm, maybe early afternoon EST, SPY in a range bound market. You're probably better off not sniping/legging out unless you know exactly what your position will look like right after you close some legs and are comfortable with it, ahead of time.
 
darkshogun said:
No I am not.
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If you are using deep in the money calls, for some reason TOS has a hard time with their delta and p&l in their calculations. I have seen a lot of people with a similar position run it through optionvue and rely on their greeks/p&l
 
darkshogun said:
Question from a novice -

I have several relatively delta neutral positions going on a TOS demo (mainly butterflies with calls) that have a theta value of about $10 per day. When the market is open and the options prices are changing, the un-trustable TOS P/L line (as well as the value of the options) fluctuates wildly. It's a little scary. For instance a position that's up about $120 when the markets are closed (and has been going up little by little each day, and which seems to follow the trajectory of the strategy -- at least that's how it appears when the markets are closed and everything isn't jumping around) will jump around from $0 or below, to up to $400 within a matter of seconds, then it'll go back down and back up again, making huge temporary moves in the P/L graph line and in the actual value of the positions. Is this normal? And if it is, is it possible to put it a close order and try to snipe these positions and get out of them early at a high price?(I really doubt it's possible, since the system is rigged anyway). Note: these are SPY and IWM positions and the prices have remained relatively stable with little movement.

With all this craziness, how the hell do you actually trade these live with all the jumping around in prices, if you're trading a complex strategy? This really has me thinking it would be best just to stick with something simpler, like credit spreads or puts and calls, or maybe not trading options at all. Would be nice to be able to execute trades when the markets are closed and things have calmed down.
More...

Three legs. It's going to fluctuate like mad if "last sale" is used. DITM fly legs will make it fluctuate. Look at the mid-price on the fly itself and ignore the chart intraday.
 
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