|
Simply
put, the single most important factor to making money in the options
market is finding the right strategies for your market assumptions.
But knowing which position to take is difficult, and involves
complex mathematical calculations and formulas.
With
the introduction of OptionStation in 1996, many of the complexities of
option trading have been removed.
Along the way, OptionStation earned critical acclaim, was
awarded Best Options Analysis Software by Stocks and Commodities
magazine two years in a row, and became the world’s best-selling
product of its kind.
Today,
OptionStation 2000i takes the process a giant leap forward with more
of everything you need to trade options successfully.
If you’re new to option trading, you’ll find that
OptionStation 2000i will be both a great learning tool and a great
trading tool. Many
describe it as a program that you’ll grow into and not out of.
If
you are an experienced option trader, you will find OptionStation
2000i packed with enormous analysis power and flexibility.
OptionStation
2000i will help you find, track and analyse winning option positions
all based on your own market assumptions.
Very simply, you tell the program your input and it, it turn
will sort through thousands of available option positions and report
back the top choices for a trade - instantly!
With
OptionStation 2000i, you not only have the ability to find the best
positions without having to perform complex mathematical calculations,
you will also be able to use the most widely-used top level option
strategies, work with “what if” scenarios, and ultimately learn to
make smarter option trades.
OptionStation
2000i facilitates trading options by breaking it down into three basic
steps: Position Search, Position Analysis and Position Chart.
Position
Search
The
Position Search allows you to identify option positions with the
highest expected profit based on the strategies, market outlooks,
assumptions, and choices you specify.
To create a Position Search window, you must first complete the
Position Search Wizard. The
Position Search Wizard is a series of dialog boxes where you answer
questions and enter information specific to the type of search you
want to perform. The
Wizard then processes this information and automatically identifies
the most profitable option positions based on the information you
provided.
Position
Search is an essential tool for the novice or experienced options
trader or investor. For
the experienced options trader, it is an excellent way to compare
one's assumptions, strategies, and risk/reward results with those that
Position Search finds.
A
novice options trader who is unsure of which selections to choose, can
use Position Search's default values for volatility, price, and models
(Pricing, Volatility, and Smart Bid/Ask).
If one were to use these defaults, the remaining steps to
complete in the Position Search Wizard would include selecting an
amount to risk, an underlying asset, the holding period, and the
strategy/market outlook. Once
you complete the seven steps that comprise the Position Search Wizard,
the 50 most profitable positions based on your selections are found
and displayed in a Position Search window.
Position
Analysis
What
is Position Analysis?
The
Position Analysis window is a comprehensive tabular-style spreadsheet
that allows you to enter the details of the options positions you want
to analyse, monitor, and track. Position
Analysis provides you with risk and profit/loss information essential
for you to make educated and profitable options trading decisions by
calculating the theoretical profit and loss of positions, risk
factors, volatilities, probabilities, breakeven and other important
analytical data. In
addition, Position Analysis allows you to display asset and option
values such as open, high, low, bid, ask, last, and volume as reported
from your data source.
Four
Main Elements of Position Analysis
There
are four main elements that comprise Position Analysis.
1.
Underlying Asset, Options, and Data Compression
The
GlobalServer provides the data for the underlying asset and its
corresponding options when the Position Analysis window is created,
whether the window is created manually or from a Position Search.
Note:
Data compression, the type of data (intra-day, daily, etc.)
used in Position Analysis, is specified at the time the underlying
asset is chosen for Position Search or Position Analysis.
2.
Options Positions (Actual and Hypothetical)
Options
positions consisting of an underlying asset and its options are the
focus of study in Position Analysis.
Option positions displayed within Position Analysis are
copied from a Position Search window or manually created and entered
within the Position Analysis window.
Positions may be actual or hypothetical. Creating
hypothetical positions allows you to compare your own positions with
Position Search generated positions.
Hypothetical positions can also be constructed to manage and
control risk. The
number of positions that can be entered into a Position Analysis
window is limited only by the capacity of your computer.
3.
Models: Pricing, Volatility, and Smart Bid/Ask
The
function of the models is to provide Position Analysis with what is
known as "core calculations".
These include the raw implied volatilities, theoretical
values (including theoretical profit and loss), the Greeks, and
Smart Bid/Ask. It is
through the models that Position Analysis provides some of the most
important "bottom line" information such as whether or not
an option is over or under valued, risks, and the future worth of a
position based on your outlook of price, time, and volatility.
4.
Indicators: Asset, Options, and Positions
The
values displayed in the various cells of a Position Analysis
spreadsheet are derived from indicators. Indicators are versatile,
easy to use, and open options analysis to new levels of study.
Indicators are inserted into the columns of the spreadsheet
and the values calculated by the indicators are displayed in the
column's cells. The
values can be the result of an extensive formula or as simple as
displaying the "last" quote of an option symbol
transmitted by the data provider. Indicators may be used "as
is," modified by changing inputs, or you can create your own to
calculate and display values that are tailored to your exact needs.
You can view an indicator's EasyLanguage instructions or
create your own using the EasyLanguage PowerEditor.
Using
the Position Analysis Window
The
OptionStation Position Analysis window enables you to apply various
indicators to your positions. Use
of these indicators allows you to monitor your positions on an ongoing
basis. You can determine
whether the position is currently overvalued or undervalued, or how
much of a profit or loss the position is experiencing.
In addition, you can monitor the price of the underlying asset
on which your position is based to ensure that its direction is favouring
your position.
If
the market turns against you, you can use the Position Analysis window
to calculate the effect of adjusting your position by adding or
exiting legs in that position. Analysis
can also be used to find new positions or adjust existing ones in
order to maximise profit. Analysis
enables you to immediately see the results of adjustments you make as
it recalculates each time you make a change.
If
you are using real-time/delayed data, you can monitor your options
positions during the trading day.
The Position Analysis window will continually recalculate the
theoretical prices and analysis techniques you have applied so that
you know what is happening, both good and bad, at any given time
throughout the day.
Monitoring
your position in order to make adjustments is a valuable function of
the OptionStation Position Analysis window.
A good example of how this might be done is to illustrate one
way that a straddle position might be adjusted once the underlying
asset has made a favourable move.
In
our example, XYZ has broken out on the upside from a congestion
pattern. Analysis of the
move indicates that the asset will continue to move upward. Rather
than keep the losing leg of the straddle (the long put), a decision is
made to close it by selling a put.
The premium received from closing the leg is used as part of
the purchase price of a second put a few strikes higher than the call
and a few strikes lower that the current asset price.
By
so doing, downside protection has been provided should the underlying
asset reverse direction. Not
only have you decreased your risk, you have a guaranteed profit for
the position. The overall
effect on the profit and loss of the position can be analysed in the
Position Analysis window prior to taking any action (eg, closing of
the losing leg, purchase of the second put, etc).
The
Position Analysis window is divided into three sections: Assets,
Options, and Positions. These
three sections provide you with all the necessary information to
accurately and easily analyse option positions, including their
profitability and risk. The
data available for the underlying asset and the corresponding options
contracts is as current as the data received by your datafeed.
The cells where you are able to enter your own data contain a
different background colour than those fields that are not editable.
Like any other window, you are able to modify the foreground
and background colour of all cells.
The
Assets Section
The
Assets section is where you view all the market data for the
underlying assets on which the option positions are based.
The indicators available in this section enable you to view
information specific to the underlying assets.
Along with indicators specific to Position Analysis, you can
also apply some of the same indicators that you use in your charting
application. See the Assets Indicator Library to view indicators available
to the Assets section of the Position Analysis window.
The
Options Section
This
section contains the majority of the data and market information.
Specifically, the Options section displays all the information
on the option symbols that correspond to the underlying asset
displayed in the Asset section. You
may individually select which options you would like displayed or you
may display all of them. Along
with many of the same indicators available in the Asset section, the
Options section includes other indicators such as Break Even Price and
Probability, Probability ITM (in-the-money), the Greeks, Theoretical
Value, and Smart Bid/Ask, just to name a few.
See the Options Indicator Library to view indicators available
to the Options section of the Position Analysis window.
You can enter as many positions as you would like in the
Options section, either by adding them manually or by copying selected
positions from a Position Search Window.
The
Positions Section
The
Positions Section displays a summary of the values, both actual and
theoretical, along with other important information pertaining to the
option and underlying asset positions that are entered in the Assets
and Options sections. As
positions are entered or modified, the changes are calculated and the
resulting numbers are displayed in the Positions Section.
The ability to keep the "bottom-line" of your
positions continually updated will help you monitor the risk and
profit of each position.
Each
position included in the Position Analysis window is listed as a row
in the Positions Section. To
combine positions, you simply create a new position and select the
existing positions you want to combine.
The results of the combined positions will be calculated and
displayed in another row in the Positions section.
For more information, see Inserting Positions Manually into a
Position Analysis Window.
Indicators
that are especially useful in the Positions section include the Gross
In/Out P&L, the Probability Calculator, the Position Delta, and
the Max Gains/Loss See the Position Indicator Library to view the
indicators available in this section of the Position Analysis window.
Combining
the Three Sections
The
Position Analysis window is displayed in a spreadsheet format
comprised of columns and rows. When
located within a Position column (eg, Pos1), cells contain
option/underlying asset contract units and costs. In addition, cells
display the calculated values for the indicator columns in which they
are located. The values
can include current option and underlying asset open, high, low,
close, bid, and ask prices as transmitted by your data provider as
well as other calculations such as moving averages and theta.
An
underlying asset is entered into Position Analysis at the time the
Position Analysis window is created, or when a position is copied from
a Position Search window.
Only
one underlying asset may be entered into a Position Analysis window.
Once the underlying asset is entered, it cannot be deleted or
replaced with another asset. The
individual option contracts for the underlying asset do not need to be
entered into the Position Analysis window.
This is automatically done, as OptionStation retrieves all
option contracts associated with the underlying asset from the
GlobalServer and copies them into the Position Analysis window.
If
you want to copy positions associated with different assets from a
Position Search window into a Position Analysis window, a separate
Position Analysis window is created for each underlying asset (if a
Position Analysis window for that asset does not currently exist in
the active workspace).
Using
Indicators in the Position Analysis Window
The
values displayed in the various cells of a Position Analysis window
are derived from indicators. Indicators
are versatile, easy to use, and open option analysis to new levels of
study. Indicators are inserted as columns and the values produced by
the indicators are displayed in the column's cells.
The values can be the result of an extensive formula or as
simple as displaying the "last" quote of an option symbol
transmitted by the data provider.
Indicators
can be inserted into the columns of the Position Analysis window at
any time. Position Analysis will begin calculating the results of the
indicator immediately using the most recent data available.
Indicators may be used "as is," modified by changing
their inputs, or new ones can be created in the EasyLanguage
PowerEditor to calculate and display values that are tailored to your
exact needs.
Understanding
OptionStation Indicator Inputs
Each
indicator available in the Position Analysis window is created in the
EasyLanguage PowerEditor. Many
of these indicators contain inputs. Changing an indicator's input
value is a very simple way to change the values used in the
calculation of an indicator or the value at which an indicator's alert
is triggered.
An
example of inputs used in the calculation of an indicator is provided
below.
The
Projected Opt Value indicator calculates the projected option value
based on the values assigned to four inputs: TARGETPRICE (target
price), TARGETDATE (target date), TARGETVOLTY (target volatility), and
INTRATE (interest rate).
In
order to calculate the projected option value, all four inputs must be
assigned values. The
values for the inputs should be your assumptions for the future price
and volatility of the underlying asset, the date the option position
will be closed, and the 90-day T-Bill rate.
An
example of inputs used to trigger alert conditions is provided below:
The
Over-Under Valued indicator has three inputs:
OverValuedAlertPct,
UnderValuedAlertPct, and RoundToFraction. OverValuedAlertPct and
UnderValuedAlertPct are inputs for alerts.
Both have a default value of 10.0, which would result in an
alert being triggered when this value is exceeded.
To
use a value other than 10.0 to trigger the alert, simply change the
value of each input to the desired value.
For example, assigning a value of 5.0 to UnderValuedAlertPct
and 8.0 to OverValuedAlertPct changes the value at which each alert
will be triggered.
Editing
a Position Analysis Indicator's Input
You
can edit (modify) any indicator that contains inputs. Once an input
has been changed, the indicator will use that input's value for its
calculations or as the trigger for an alert, depending upon the input
type. The changed input
setting will be applicable to the active Position Analysis window
only, unless designated as the default setting.
Inputs
are edited on an indicator-by-indicator basis. When editing any
indicator, the changes made apply only to that indicator. It is
important to note, that indicator settings are unique to the indicator
within the section it is located (Asset, or Option, or Position).
Therefore, when an indicator is used in more than one section,
it can have its own unique settings for each section.
Position
Analysis Summary
The
OptionStation Position Analysis window enables you to apply various
indicators to your positions. Use
of these indicators allows you to monitor your positions on an ongoing
basis. You can determine
whether the position is currently overvalued or undervalued, or how
much of a profit or loss the position is experiencing.
In addition, you can monitor the price of the underlying asset
on which your position is based to ensure that its direction is favouring
your position.
If
the market turns against you, you can use the Position Analysis window
to calculate the effect of adjusting your position by adding or
exiting legs in that position. Analysis
can also be used to find new positions or adjust existing ones in
order to maximise profit. Analysis
enables you to immediately see the results of adjustments you make as
it recalculates each time you make a change.
If
you are using real-time/delayed data, you can monitor your options
positions during the trading day.
The Position Analysis window will continually recalculate the
theoretical prices and analysis techniques you have applied so that
you know what is happening, both good and bad, at any given time
throughout the day.
Monitoring
your position in order to make adjustments is a valuable function of
the OptionStation Position Analysis window.
A good example of how this might be done is to illustrate one
way that a straddle position might be adjusted once the underlying
asset has made a favourable move.
In
our example, XYZ has broken out on the upside from a congestion
pattern. Analysis of the move indicates that the asset will continue
to move upward. Rather
than keep the losing leg of the straddle (the long put), a decision is
made to close it by selling a put.
The premium received from closing the leg is used as part of
the purchase price of a second put a few strikes higher than the call
and a few strikes lower than the current asset price.
By so doing, downside protection has been provided should the
underlying asset reverse direction.
Not only have you decreased your risk, you have a guaranteed
profit for the position. The
overall effect on the profit and loss of the position can be analysed
in the Position Analysis window prior to taking any action (eg,
closing of the losing leg, purchase of the second put, etc).
The
possible range or distribution of the potential closing prices of the
underlying asset at option expiration is determined by time and
volatility. Volatility is
defined as the amount that the price will move during a given period
of time. The more
volatile the underlying asset, the more the expected movement. Conversely, a less volatile underlying asset can be expected
to have a smaller price movement.
The time to expiration also tends to spread out the possible
range of price changes. The
greater the time to expiration, the more events that can happen, thus
moving the price either higher or lower.
Another aspect of time is its detrimental effect on option
purchases—the continual decline in the value of an option due to
time decay.
Position
Charts
Since
price, time, and volatility are the most important factors affecting
an option's value, Position Charts can help you to visualise the
impact that time, price and volatility would have on the value of an
option. Position Charts
are a highly effective means of doing "what if"
analysis—for example, what if volatility changes from 25% to 35% or
25% to 45%; what if price changes from 60 to 80; or what is the effect
of time on the value of an option. By displaying Chart Values window,
you are able to see the corresponding values of your position given
various scenarios for price, time, and volatility.
OptionStation
is the most powerful tool you can use to take advantage of the limited
risk, leverage, flexibility, and the unlimited profit potential that
only the options market can provide.
What
are Position Charts?
All
options positions are based on the four basic legs: long call, long
put, short call and short put, and some positions might also include
the underlying asset. For more information, see Four Basic Legs in Options Trading.
These positions comprise various search strategies.
A search strategy is bullish, bearish, or neutral in relation
to the underlying asset. Visualizing
these positions will help you understand how these positions are used
to build search strategies. A
position chart is an ideal way to illustrate this concept.
A
Position Chart can represent the following:
*
How your position will perform over time relative to the price
of the underlying asset.
*
How your position will perform in relation to changes in the
price of the underlying asset.
*
How your position will perform in relation to changes in the
volatility of the underlying asset.
All
Position Charts provide a visual aid to assist in determining the risk
and reward of applied search strategies.
In short, the basic function of a Position Chart is to enable
you to visually analyse and view your position for profitability and
risk.
A
Position Chart plots the theoretical values of any position that is
created within a Position Analysis window.
There is a maximum of six plots per Position Chart and each
plot may contain an actual or a hypothetical position based on the
following factors: underlying
asset's price, underlying asset's volatility, and the passage of time.
It
does this by visually displaying a plot line that depicts the
position's value relative to the change upon which you are basing your
chart. A Position Chart
will demonstrate the risk and reward of the options strategies you
select by charting the selected plot types relative to the variable on
which your chart is based (price, volatility, or time).
You can plot the Theoretical Gross Out P/L, the Greeks, or any
of the many various plot types available relative to the chart's
variable. For more
information, see Using Position Charts to Evaluate Theoretical Profit
and Loss.
A
Position Chart is considered a window, and will always be placed
inside the workspace containing the Position Analysis window on which
it is based. You can
insert an unlimited number of Position Charts into a single Position
Analysis window. Position
Charts associated with a Position Analysis window are available any
time the workspace containing the Position Analysis window is open.
Using
Position Chart Window Templates
Once
you have created and formatted a Position Chart window, you can save
the formatting style as a template. Saving a window template preserves
all formatting applied to the window.
The template and its formatting styles may then be applied to a
new Position Chart window or an existing one.
Using templates can be a tremendous time saver when creating
new windows and workspaces.
Take
me back to the OptionStation home page
Details
System
Requirements
|
