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Options Master

Options Master

 

The Option master panel delivers detailed information about options, permits to analyse strategies
graphically and trade them rapidly.

To open a new Option master panel, go to Terminal > Option master OR Click on this icon in the
toolbar ribbon

Settings-

Pressing the button opens the dialog window ‘Option Master – Settings.’ This block allows
specifying general settings to the Option master panel.

The General settings tab is separated into three sections: General, Analyser and Volatility lab.

General-

These settings are used to customize the following parameters

  • Price model – shows the Option Pricing Model used for calculation (currently Black-Scholes).
  • Implied Volatility (IV) calculation– allows selecting the price for calculating Implied Volatility.
    You can use any of the values from the drop- down- (Ask, Bid, (Ask + Bid)/2 and Last)
    to calculate IV.

Option chain-

The ‘Option Chain’ tab shows detailed information about a specific options contract and allows you
to trade from it. The tab uses the colouring method to differentiate between strikes that can be bought and sold.
Depending on the price change at a certain strike, you can see them highlighted.

Users can choose specific number of strikes to be displayed for each expiration date from the
drop- down button placed below the ‘Option Chain.’

 

 

To customise column settings, right- click in the column menu in the ‘Option Chain’ tab and customise from the
list of available options.

 

 

The total number of option contracts available for a specific underlying is displayed through the Context menu
by right- clicking on the table header OR in the blank space next to the ‘Option Chain.’

There are two categories of ‘Option Chain types’

1) Classic-

This mode displays the current options contract for the underlying. The strikes are placed at the centre of the
panel with ‘Call Options’ on the left and ‘Put Options’ on the right.

To select an alternate options contract, go to the drop- down in the Option Chain panel and choose from
the available list of tradable contracts.

You can choose your ‘Strikes aggregation style’ from either of the following:

  • From ATM strike – strikes are aggregated from the midpoint.
  • Custom underlying price – strikes are aggregated from the specified price of the underlying.

 

 

2) Standard-

Displays all existing contracts side by side. You can check the required options contracts and make them accessible
for trading in the ‘Option Chain’ tab.

Here, you will find three types of ‘Strikes aggregation style’

  • From ATM strike – strikes are aggregated from the midpoint.
  • Selected strikes – allows choosing strikes with which the user will work.
  • Custom underlying price – strikes are aggregated from the specified price of the underlying.

 

 

The Implied Volatility (IV) column shows expected volatility which characterizes the degree of the price volatility
of the underlying. If IV is high, expect the underlying price to be extremely volatile.

 

 

Colouring method –

Allows selecting the colouring scheme for the ‘Option Chain’ tab from the dropdown: Classic or Historical volatility.

If you select ‘Classic’, you can choose the colour of ITM and OTM options separately.

However, if you select Historical volatility, you will have to define

  • Current HV, % – shows current value of historical volatility for the underlying (Min = 0, Max = 1000). Pressing
    the button allows to reset custom value of historical volatility to the calculated value from the symbol
    chart by the selected price type.
  • Price – allows specifying the underlying price from which values for ‘Standard Deviation’ and 2*S.D. are plotted. Prices are available as Last, (Bid + Ask)/2, OHLC/4 and OHL/3.
  • You can also define colours for ATM, SD and 2*SD.

Trading from the ‘Option Chain’-

To start trading,

  • Edit the 'Paper position' column next to the corresponding strike in order to add a position.
  • Set negative values for short positions and positive values for long positions.
  • Add the corresponding quantity.

Once the positions and quantity are added, they will appear in the "paper" status and will be displayed in the
'Test on paper' tab below the ‘Options chain.’ To view the pay-out diagram of your strategy before
placing real- time trades, click on the ‘Analyser’ button next to the ‘Options chain’ tab.

 

 

 

“Test on paper” panel contains a very useful column called “Link” which can be used to link current asset price to
the column “Price” of created (paper) order based on Bid, Ask and Last. You can use the buttons of the
“Test on paper” tab to carry out the following actions-

  • Add underlying - opens the Order entry panel.
  • Cancel all - cancels all 'test on paper' orders.
  • Place all - places all 'test on paper' orders.

To convert "paper positions” into real- time trades, check the 'Send' column and click on the 'Place selected' button.
Real- time trades can be viewed under

  • Working orders- if they are pending.
  • Positions- in the event the order is confirmed.

You can also place trades by following the steps mentioned below

  • Select a strike price
  • Double click on the row where the strike price is located.
  • A pre- filled order entry window will appear.
  • You can make changes to the order and click on “Place Order.”

Analyser-

This tab is used to graphically represent the pay-out of options strategies in the ‘Test on paper’ mode. The main
purpose of this tab is to describe the portfolio of positions (Test on paper tab) graphically and to model
and change the portfolio accordingly.

A typical analyser chart comprises of four components

  • Intrinsic value
  • Time line (time to expiration)
  • Zero line
  • Underlying price

 

 

Settings-

 

 

  • Chart type – allows setting the type of information to be displayed on the chart. You can choose charts based on the following types: P/L, Delta, Gamma, Vega and Theta.
  • 'T +' – allows modifying the numbers of days remaining until expiration of option or futures contract.
  • Volatility, % – allows modelling expected volatility change in %. Range of changing: -99%- ∞, %. Option "1 px" controls the width of volatility lines on the analyser chart.
  • Lines – this setting establishes the interconnection between 'T +' and Volatility, % parameters
  • Time change – if selected, user can add lines which simulate the change by time and apply to them the change by volatility.
  • Volatility change – if selected, user can add lines which simulate the change by volatility and apply them the change by time

To maximize the chart view, hide the Chart settings menu by pressing the button.

To zoom-in/ zoom out of charts, click the located at the bottom- right corner of the chart field.

Probability calculation:

Allows calculating the probability of price movements of the underlying from any of the following values

  • None – Does not calculate probability.
  • Single – Calculates probability of the change in underlying price to a specified level set by the user in the form of a vertical line.
  • OR – Calculates conditional probability of the occurrence of an event P1 or P2 designated by the user on the chart in the form of vertical lines.
  • AND – Calculates conditional probability of events P1 and P2 correspondingly as designated by the user on the chart in the form of vertical lines.

To calculate probability, select any of the above functions and click on the "Refresh probability" button.

Probability calculation using the ‘OR’ function-

 

 

Probability calculation using the ‘AND’ function-

 

 

Overlays-

To overlay ’Greeks’ in the Option analyser chart, right click anywhere in the vertical axis to the left of the chart analyser window. Choose the data series to overlay the options payout diagram from Delta, Gamma, Vega, Theta and Rho.

Only one data series can be selected. "What if" scenario cannot be applied to the data series located on the auxiliary axes. Double click within the chart area or in the ‘X axis’ in order to enable Auto scale mode for both the axis simultaneously.

 

 

Volatility Lab-

This tab allows plotting volatility values for a specific option contract. It is also possible to plot "Volatility lab" graph based on real- time market data and Vanna-Volga implied volatility model. Users can customize parameters from the ‘Settings menu.’

 

 

In the following description, the blue line represents "Volatility lab" plotted from real- time data and the red line indicates Vanna-Volga implied volatility model.