Trading Discussions

Options Explorer => Introducing Options Explorer => Topic started by: TradingAdmin on February 14, 2017, 05:15:17 pm

Title: Overview
Post by: TradingAdmin on February 14, 2017, 05:15:17 pm
What is it that we want to do trading options, what are we after, what is the goal, what do we want to achieve?  From personal experience there are a number of key requirements:

Options Explorer assists me with all of these actions.
I order to offer us all this functionality there are a few supporting functions that we need to attend to - such as our data imports and general commodity information that we may need to update..

Over the next couple of posts, we'll look at each of these software features in a bit more detail
Title: Re: Overview
Post by: TradingAdmin on February 14, 2017, 06:33:33 pm
Selecting a Market - by IV

This is a commodities Heat-map:

(Before we continue, note that the colour scheme is customisable by the user - thus you are free to use whatever colours suits your style for the heat map)

I mainly focus on SELLING options.  Thus in my colour scheme,

What this feature does, is it rates all of my commodities for me on a scale from HIGH IV to LOW IV.  At one glance I am able to select a market based on whether the commodity's options at the moment are priced high or priced low (please note that this is high or low in terms of IMPLIED Volatility (IV - where the options currently are trading at) and not in terms of Historical or Statistical Volatility)

This selection strategy implies I have certain favourite trading strategies, based on the IV, that I like - and I am selecting my market based on this condition - I need (in my case) a high IV for that is where my strategy works best (selling options).  I can see that high IV markets are Lumber, Oats, Feeder Cattle, Cocoa, Cotton, Copper.  Moderately high markets would be Wheat, Gasoline, Hogs, Heating Oil and some financials..  Coffee and Crude Oil are really cheaply priced if I want to consider buying options.

On top of this information, the points themselves give me some additional information for each commodity.  For example with Cocoa and Cotton I can see that the options above the current price are priced high (in other words the Calls) while those below the current price are priced low (the Puts), while with for example Wheat, both the Calls and the Puts are priced high.  In other words the market is pricing in extra risk to the upside for Cocoa and Cotton!!

From here I may right-click on my points on the heat map, which will give me previews (charts) of my commodity markets:


And from here I may select a market to trade in.  Note how my commodity graph background colours contain the same IV information - those with a green background are HIGH IV markets, the blue is a MODERATE IV market.  For example Cotton is in an established uptrend, the last price movement just took out a Rh (previous high) on my price chart.  If I have a trading strategy for a Bull market and High IV, this is a potential market to analyse...  (I may right-click on the graph and from there open the Options Analysis tool - this will take me directly to my powerful Analysis functions)