Index option software trading
They can be exercised at any point from the purchase date to expiration. European options, however, you can only redeem on the date of expiration. A lot of people swiftly realise there are numerous similarities between day trading options and futures. They are both usually based on the same underlying instrument. The makeup of the actual contracts also shares numerous similarities.
The difference is how they are traded. With options, you get a broader range of available options. Options can be traded singularly, or you can purchase them alongside stock trades or futures contracts to create a form of insurance on the trade. There are a number of reasons you can make serious money trading options.
Even putting financial remuneration to the side, day trading with options appeals for several attractive reasons. Intraday options trading is multi-faceted and brings with it great profit potential. The best part though — accessibility. You can start day trading with options from anywhere in the world. All you need is an internet connection. Despite the numerous benefits, there are certain challenges that come with trading in options. Fortunately, all the obstacles listed below can be overcome.
If you take both considerations into account you can adjust your trading plan accordingly. Your broker will help facilitate your traders. Today there are numerous online brokers to choose from. The challenge is finding one that meets your individual needs. Strategies for day trading options come in all shapes and sizes, some straightforward and some complicated. Before we look at an example, there are a couple of essential components most strategies will need.
Your chart will require the best indicators for trading options. These vary from strategy to strategy, but they include:. Not just when you enter and exit the trade though, but also when you set up for the trading day ahead. Options strategies that work usually have a trader behind them who is up bright and early.
For example, you may want to be up as early as You can start setting up your trading strategy based on what your market has done throughout the night. In addition, certain equity or index options may have larger numbers of strike prices and larger numbers of PMMs or CMMs assigned to them, thus causing the number of market data updates per second to rise significantly. Such amounts of market data, for some customers, may be difficult to efficiently process, particularly during volatile periods.
Referring again to FIG. At the trading host level, the trading host is programmed to recognize, for a particular market or contract, the absolute market data output also referred to as the outbound stream. If the outbound stream exceeds a certain rate of messages per second, the market data control is activated so that a predetermined limit of, for example, 10, outgoing messages per second is never exceeded.
Alternatively, the outbound stream limit may be set as appropriate within the range of ,, outgoing messages per second. Market data controls may also be implemented at the interface level.
Typically, as in the example described above, high levels of market data may be generated under normal conditions e. If the trading host detects a queue building at an individual interface session level, a market data control may be automatically activated for that individual interface session. To perform summarization, the trading host contains code that automatically looks for market data i.
For example, whenever a new bid or offer is made by any market participant at a different price than the previous order, that data will be summarized by the trading host For example, new orders submitted at a price which already exists in the order book will only result in a volume update.
In this way, the amount of market data sent by the trading host at peak times is severely controlled, thus protecting market users. However, trade prices and an individual ITM's responses from the trading host are usually not summarized.
Each of the trading host and the interface has at least one message queue onto which messages are placed. Messages are inserted on to the queue and the queue will handle the summarization and throttling itself. The implementation of the queue will enable the bulk of the queue implementation to be shared between the interface and the trading host Information about which contracts can be summarized is sent from the trading host to the interface In addition, a throttle will be implemented to enable the trading host to reduce the number of summarized messages sent.
In this manner, the throttle is used to reduce message flow which may allow a queue to build up, thus causing more summarization to occur.
The message queue acts like the normal queues, in that messages can be put on to the tail of the queue and removed from the head of the queue. However, this message queue contains throttling and summarization algorithms, as described above. Typically, each message contains a header that includes a timestamp and commodity key. The first character indicates the exchange code. The second character is the generic contract type.
The remaining three characters are the commodity code. Summarization is typically performed on a commodity key level, which is specified when the queue is initially created, because it will not change during the day. Messages for those commodities not being summarized within the trading host bypass the summarizing queue and throttle mechanism. Although these messages are not be subject to summarization, they still pass through the summarizing queue and throttle mechanism.
The message queue uses a series of rules to determine when messages can be summarized. For example, the rules may be used to determine whether a new OnMarketOrder should overwrite an earlier OnMarketOrder. If the message is for a commodity that cannot be summarized, then that message is processed unchanged.
If the message is for a commodity for which summarization is enabled, then additional checks are performed, depending on the type of message. If the message is of a type that cannot be summarized, then that message is inserted on the queue unchanged. If the message is part of a trade, then the state of the market before the trade should not be overwritten.
The OnMarketOrder messages for the trade should not be summarized with earlier OnMarketOrder messages, nor should later messages be summarized with these OnMarket Order messages.
A message queue may be flushed at appropriate times, i. Messages from the same series arriving after the flushing message continue to queue up behind it, and they will not be sent out before the flushing message. A market update message with a trade price has a guaranteed delivery, in that it can not be overwritten or deleted in the throttling process, and the original timestamp of the trade will, therefore, be retained.
If a message of a summarizable type for a commodity where the summarization of messages is enabled is sent, then the trading host checks the queue to determine if there are any messages on the queue that the newly sent message can supersede.
If so, the earlier message is replaced with the new message, subject to the trade rules described above. Jumping refers to a situation such as the following: Additionally, a trader who withdraws an order may receive the order book updates for that withdrawal before the withdrawal order status message. The trading host can send out an OnMarketImpliedUpdate message, if the price is at least as good as the price in the OnMarketUpdate message. Note that the sending of implieds for a particular market is configured on the trading host Implied updates will be superseded in the throttle queue if any of the following situations occurs: There is no series prioritization i.
In addition, the trading host ensures that all messages retain their given timestamp. If message 1 is overwritten by or summarized with message 2 , then the timestamp of message 2 is retained. This will result in timestamps being out of sequence, but the timestamp relates to the time the event happened, not the time that the message was sent out. All of the examples shown in FIGS. In particular, the market maker is only showing prices for which calculating option values is relatively easy, i.
Traded volume has only taken place in the 23 calls. This option is listed on Euronext. In this example, market makers are posting bids and asks, across a wide range of strike prices. Traded volume has taken place in the August 5 7. The CAC 40 Index Options are currently not subject to an electronic market model according to a preferred embodiment of the present invention.
As can be seen, active bids and asks are posted from the to calls, and the to puts. Traded volume has been active within this tight range. In addition, particularly on the calls, traded volume has been active from the to strikes. It is noted that where bids are shown as blank above against an offer of 0. Thus, by comparing the relatively sparse amounts of information shown in FIGS. While the present invention has been described with respect to what is presently considered to be the preferred embodiment, it is to be understood that the invention is not limited to the disclosed embodiments.
To the contrary, the invention is intended to cover various modifications and equivalent arrangements included within the spirit and scope of the appended claims. The scope of the following claims is to be accorded the broadest interpretation so as to encompass all such modifications and equivalent structures and functions. Year of fee payment: A method and system for facilitating trading of equity and index options is provided.
The system also provides protection to the market makers by enabling withdrawal of certain bids and offers if a cumulative delta on traded options has been exceeded. The system also provides limits on the rates at which individual traders and the overall market submit bids and offers.
The system provides summarization of market data to enable market makers to have relevant and timely data at all stages. In this manner, the system achieves increased liquidity of the equity and index options markets. Field of the Invention The present invention relates to the field of financial markets. Related Art Volatility and uncertainty are ever present in today's financial markets, especially in the equity markets. They may be used in a number of different ways, including the following: For most options, the expiry dates available are fixed at three-monthly intervals, and the most common cycles are: For example, referring again to FIG.
When the January options expire, October options will be introduced, so that April, July and October options will then be available. A system for facilitating trading of equity and index options, each option being assigned to a class, each class including a plurality of predetermined series of options, and the system comprising: The system of claim 1 , wherein when at least one bid or offer entered by the second user results in a trade, the server is further configured to compute a delta corresponding to a trade, the delta being selected from the group consisting of a volume of the trade and a total number of bids and offers associated with the trade; and, when a subsequent at least one bid or offer entered by the second user results in a subsequent trade, the server is further configured to track a second user cumulative delta by adding a delta corresponding to the subsequent trade to a sum of the previous deltas; wherein, when the second user cumulative delta exceeds a predetermined delta limit, the server is configured to enable the second user to withdraw all outstanding bids and offers that were simultaneously entered by the second user.
The system of claim 1 , wherein the server is further configured to restrict a rate of entry of bids and offers by the first user, wherein when a rate of received bids and offers from the first user exceeds a predetermined limit, the server is configured to reject an attempt by the first user to enter an additional bid or offer.
The system of claim 3 , wherein the predetermined limit is messages per second. The system of claim 1 , wherein the server is further configured to restrict a rate of entry of bids and offers by the second user, wherein when a rate of received bids and offers from the second user exceeds a predetermined limit, the server is configured to reject an attempt by the second user to enter an additional bid or offer.
The system of claim 5 , wherein the predetermined limit is messages per second. The system of claim 1 , wherein the server is further configured to restrict an aggregate rate of entry of bids and offers by all users, wherein when an aggregate rate of received bids and offers from all users exceeds a predetermined limit, the server is configured to reject an attempt to enter a bid or offer by any user.
The system of claim 7 , wherein the predetermined limit is 10, messages per second. A method of trading of equity and index options, each option being assigned to a class, each class including a plurality of predetermined series of options, and the method comprising the steps of: The method of claim 9 , further comprising the steps of: The method of claim 9 , further comprising the step of using the computer to restrict a rate of entry of bids and offers by the first user by rejecting an attempt by the first user to enter an additional bid or offer when a rate of received bids and offers from the first user exceeds a predetermined limit.
The method of claim 11 , wherein the predetermined limit is messages per second. The method of claim 9 , further comprising the step of using the computer to restrict a rate of entry of bids and offers by the second user by rejecting an attempt by the second user to enter an additional bid or offer when a rate of received bids and offers from the second user exceeds a predetermined limit.
The method of claim 13 , wherein the predetermined limit is messages per second. The method of claim 9 , further comprising the step of using the computer to restrict an aggregate rate of entry of bids and offers by all users by rejecting an attempt by any user to enter an additional bid or offer when an aggregate rate of received bids and offers from all users exceeds a predetermined limit.
The method of claim 15 , wherein the predetermined limit is 10, messages per second. Not only do they cover an extensive list of products but they continue to improve what they offer their customers. In this review of TradeStation, we have assessed everything they have to offer from the perspective of an options trader. Most traders will find some benefits in using TradeStation, but this broker is particularly well suited to active and experienced traders who can make the most of the powerful technology.
The fees are reasonable even for low volume traders, but high volume traders will get the best value. TradeStation offers two pricing plans for trading options: The flat fee trading plan is variable, and the costs depend on the number of trades made in a calendar month.
The best value for your money here is definitely at the higher volume levels, but two separate trading plans along with reasonably competitive charges for low volume traders suggest that TradeStation is trying to appeal to everyone. It takes some getting used to and there's a fairly steep learning curve, but the potential benefits can make the effort more than worthwhile.
The only real downside of the platform is that beginners may struggle to get the most out of it. This is somewhat mitigated by the fact that TradeStation offers home study courses and online video courses that will teach you how to use the platform effectively. This is called Option Station Pro and has a number of features that options traders will find very useful. The advanced order entry technology makes it easy to trade even complex strategies with ease, while the Spreadmaster position management tool allows for the simple creation of customizable spreads.