The Options tab may be viewed from the Control Panel on the right-hand side of the software. The Tab will appear as 'Options' with a turquoise and purple up/down arrow.
Once activated, your quick reference accounting information will be displayed at the top of the Options Tab. Here you will see your options profit/loss information along with required and available Margin. More information regarding your quick reference accounting information is available in the Trades Tab section. [1]
Options Orders
You will have access to create new buy/sell call and put options using the Buy/Sell CALL and Buy/Sell PUT buttons. You may close this charts options by selecting the Exit CHART Opts button. To close all options orders, select Exit ALL Opts.
Options Contract
Your options contract month may be selected in the drop-down window provided left of the Int Rate (Interest Rate) button. Use this Window to choose your chosen option contract month. Bolded contracts are monthly options.
Strike Price
The lower section of the Options Tab will show you the current market values for each available Strike price. Puts and Calls are colored to match filled option orders on the chart. Options at the money are displayed in a different color that correlates to the Bid/Ask lines color of Chart Preferences. You may also place orders using this window by right-clicking on your desired Strike level.
Columns: There are many columns in the Strike Price window for further Options analysis. Making the Options Tab wider will reveal these, or right-click on column titles and choose Column Setup. This will show the Options Strikes Table Column Chooser which includes short descriptions of each column and the option to turn on or off each of the columns.
Puts, Calls, Both, ITM or OTM: Use this feature to the right of the Option Qty buttons to toggle the Strike Price window to show only Puts, Calls, Both puts and calls, In The Money options (puts and calls), or Out of The Money options.
Options will fill by default at the current Bid/Ask (fastest fill). You may change this default to instead fill at the Bid/Ask Midpoint (better price). To apply this setting, right-click a Buy/Sell Call/Put button in the Options tab. The window on the left will appear and you may change to use the Midpoint price instead. You may also right-click the Exit CHART Opts and Exit ALL Opts to adjust this same feature for exiting trades.
Quickest Fill
To achieve the quickest possible fill:
- Buy a contract (i.e., bid for a contract) at the ask.
- Sell a contract (i.e., ask someone to buy a contract from you) at the bid.
Remember for quickest fill:
- When buying: your bid = market ask
- When selling: your ask = market bid
Best Price
To get the best possible price (as opposed to the quickest fill), enter at a different price than:
- If selling, the bid: to sell a contract, place an ask that is higher than the bid.
- If buying, the ask: to buy a contract, place a bid that is lower than the ask.
Remember for best price:
- When Buying: your bid < market ask
- When Selling: your ask > market bid
Days to Exp
Days left until the expiration of the option. The contract expires at the end of the 0th day until expiration.
Qty
The number of options contracts one is seeking to buy or sell.
Market Price
The current value of the option at a particular strike price.
Limit/Premium Value
When placing an options order, this is a modifiable value. This value changes according to its minimum move.
Note:
A limit/premium value further away from the current bid/ask/last is less likely to be touched in the short term.
GTC
An order that is Good 'Til Cancelled (GTC) will remain in the market until it is:
- canceled by the client
- executed in the market
- canceled because it has expired
Day
A Day option order is canceled at the current trading session’s market close if it has not yet been executed in the market.
Premium Minimum Move
The limit/premium of an option can change by certain increments. The amount of this increment is the premium minimum move.
Cost
If the option is on the buy side, then it will cost you money to acquire it.
Collect
If the option is on the sell side, then you will collect an amount of money if it is acquired.
Spread
The difference between the bid and the ask is called the spread.
Liquidate Value
The current value. Closing the option at the current value yields the liquidate value.
Premium
The price of the option.
Total Premium
Premium * quantity * 1 full point value of the underlying futures contract.
Theoretical Value
The calculated value of the option based on an options pricing model.
Volume
The number of transactions that have occurred for the given option symbol today.
Open Interest
The total number of options that are not closed or executed.
Option Symbol
OAUDV2 C100 is an example of an options symbol:
- OAUD is the symbol base, where AUD is the underlying symbol.
- V2 is the symbol for the month and year.
- C100 is the strike quote, a call at 100.
In order to load your options order preferences, right-click an options order diamond you have placed in your chart and select Properties.
There are three separate types of options orders. Options preferences are broken into these three separate sections. A Regular Option, a Pending-To-Close Option, and a To-Be-Closed(Original) Option.
Regular Option
The first section of the options preferences will be dedicated to a regular option order placed within the chart window.
An example of a regular option order would be placing a Buy Call which fills above your market. You may customize colors based on whether it is a bought or sold option along with if it is a call or put option.
You will also be able to choose what on-screen text would be included with these trades. You can add descriptions which are as varied as Expiration, Premium, Volume.
Option Line Text
Will apply to any text descriptions that are added directly to the option line, which will appear locked on the left-hand side of your chart window.
Option Diamond Text
Will apply to any text descriptions which are attached directly to the options original diamond location.
Pending-To-Close-Option
When you decide to liquidate an option, you can right-click on that option diamond and click Liquidate to create a new Pending-To-Close order.
If this order fills immediately, your options will close and no longer appear in the chart. However, if this new option does not immediately trigger from possibly a custom limit, then a new Pending-To-Close trade will be placed over the top of your To-Be-Closed Option.
By default, this pending order will appear in yellow, and it too will have appearance preferences that you may customize in the chart window.
To-Be-Closed(Original) Options
If you would like to see the To-Be-Closed(Original) Options in your chart window and it is being covered by a Pending-To-Close order, right-click on the yellow pending order's diamond and choose to Send to Back.
Once this Pending-To-Close order is sent to the background, you will see your original options order, which will now be displayed using the To-Be-Closed(Original) Order Text preferences.
It is this preferences section shown to the right that applies to To-Be-Closed(Original) Options.
Order Types (Buy, Sell, Open, Close):
When placing an options order, there are four types of option order that can be placed: Buy to Open, Sell to Open, Buy to Close, and Sell to Close. If a Buy to Open order is placed, then you are long that contract (call or put), which does not mean the same as being long an asset. Being long a contract simply means that you purchased the contract (i.e., you can be long both puts and calls). If a Sell to Open order is placed, then you are short that contract (i.e., you have simply sold an option, which can be either a put or a call). Buy to Close and Sell to Close orders, on the other hand, are simply orders that close out an existing option position. If you “Bought to Open” then you need to “Sell to Close,” but if you “Sold to Open” then you need to “Buy to Close.”
Definitions:
Buy to Open- An option order that establishes a new position that is long a particular contract.
Sell to Open- An option order that establishes a new position that is short a particular contract.
Buy to Close- An option order that closes out a previous position that was short a particular contract.
Sell to Close- An option order that closes out a previous position that was long a particular contract.
Prices (Bid, Ask, Limit, Market):
When placing an options order, you are allowed to specify various pricing criteria that specify how much you are willing to pay (or receive) for an options contract. Placing a Limit Order allows you to specify the maximum price that you are willing to pay (or receive) for a contract when you are buying (or selling) that contract. Placing a Market Order, on the other hand, specifies that you are willing to accept the market price, at the time the order is filled (not when the order was placed). The price that someone is willing to pay for a contract is called the Bid (when buying) and the price that someone is willing to accept for a contract is called the Ask (when selling). Lastly, the midpoint between the bid and ask is called the Bid-Ask Midpoint and the length between the bid and ask is called the Bid-Ask Spread.
Trader Tip:
When buying an option contract you will buy at the ask but when you are selling an option contract you will sell at the bid.
Definitions:
Bid - The price that a buyer is willing to pay for a given option contract.
Ask - The price that a seller is willing to accept for a given option contract.
Bid-Ask Midpoint - The price that is exactly in-between the best bid and best ask.
Bid-Ask Spread - The difference between the best bid and the best ask, currently in the market.
Market Order - An order that is to be executed as quickly as possible at the prevailing market price.
Limit Order - An order that guarantees that the price received is equal to (or better than) the price specified, but there is no guarantee that the order is executed.
Contract Terminology
Contract Specifications (Expiration, Exercise, Strike, Underlying, American, European):
An option is a contract that grants the owner of the option the right, but not the obligation, to purchase or sell an underlying asset at a pre-specified price, on or before a pre-specified date. The pre-specified price is called the Strike price (it is also known as the exercise price) and the pre-specified date is called the Expiration date (which is when you are able to Exercise your right to purchase or sell the Underlying asset that is specified in the contract). American options allow you to exercise the option on or before the expiration date. European options, on the other hand, only allow you to exercise the option on the expiration date.
Definitions:
Expiration - The day that the option contract expires.
Exercise - Invoking the rights associated with the option contract.
Strike - The price at which the contract can be exercised.
Underlying - The asset on which the option contract is based.
American - A type of option contract that gives the option holder the right to exercise the option on or before a specified date (this is not an indication of where the contract is traded).
European - A type of option contract that only allows for the option to be exercised on the expiration date (this is also not an indication of where the contract is traded).
Contract Types (Call, Put):
An option contract gives the option holder (i.e. the side of the contract that is long the contract) the right, but not the obligation, to buy or sell a pre-specified asset to the option writer (i.e. the side of the contract that is short the contract). An option contract that gives the holder the right to buy the underlying asset, at a predetermined price, is called a Call option, whereas an option contract that gives the holder the right to sell the underlying asset, at a predetermined price, is called a Put option.
Definitions:
Call Option - A contract that gives the buyer the right, but not the obligation, to purchase an asset at a predetermined price on or before the contract expiration date.
Put Option - A contract that gives the buyer the right, but not the obligation, to sell an asset at a predetermined price on or before the contract expiration date.
Column Setup in Options Chains
The following columns can be added to the Option Chain tab in the following views: Calls, Puts, Both, OTM, and ITM (Traditional View columns cannot be edited). To add/remove/edit columns in these views right click on any column header and select the Column Setup to see the following columns that can be added/removed:
Links
[1] http://education.trackntrade.com/node/2042