Options strategy builder overview
Options strategy builder is a tool that allows you to visualize risk profiles of standard options strategies, like naked options, vertical spreads, straddles, etc. You can pick up a strategy and customize its parameters according to your market outlook. Choose the correct expiration, adjust strikes, and position size. Below we give details on each part of the builder.
Strategy
We use the term strategy or options strategy in this manual heavily, so let’s define it: options strategy is a set of one or more positions in options or options underlying.
We call a position within strategy a strategy leg or leg. Thus, any strategy consists of one or more legs.
Controls
Several controls allow you to pick an options strategy and adjust its parameters.
Current values
Under controls, there is a panel with current values of the most parameters of a strategy.
Max Loss / Max Profit
Theoretically possible maximum loss and maximum profit values of a strategy. Learn more.
Win Rate
There are green segments on the risk profile chart, where strategy expires with profit, and red segments, where strategy expires with loss. Learn more.
Breakeven
Breakeven points are underlying instrument prices where the strategy has zero profit at expiration. Learn more.
Greeks
Values of Delta, Gamma, Vega, Theta, and Rho at the current moment for the selected strategy.
Values of the Greeks are summed for each position in the strategy. For example, in our strategy, we have 2 options with delta values of 0.66 and -0.22. The overall delta of the strategy will be 0.66 - 0.22 = 0.44. The same rule applies to all the Greeks.
Learn more:
Chart
The core thing. X-axis is an underlying instrument price. Left Y-axis shows a P&L of a strategy. The right Y-axis shows values of selected Greek (orange line).
You can zoom chart with the mouse wheel.
There are several lines on the chart:
Payoff profile or risk profile – green/red line
Shows the financial result of a strategy at expiration. Segments, where the line is green, are profitable at expiration.
P&L – blue line
Strategy P&L at the current moment depends on the underlying instrument price. Time decay brings this line to the payoff profile at expiration.
Greeks – orange line
Selector under the chart allows you to choose a Greek that will be displayed on the chart.
Options Board
This view shows a standard table representation of an option series data.
Columns
- Strike – strike price of a contract. Left to this column, there are data for call options, and right to the strike – columns for put options
- Bid/Ask – prices of the actual best bid and ask of an options
- Delta, Gamma, Vega, Theta, Rho – greeks of an option
Strategy legs highlights
Highlighted bids and asks denotes operations with legs of the selected strategy. If the ask is highlighted, this means that in this contract, we have a long position (we bought at a best-selling price). Otherwise, for short legs, we sell them at the best buying price. Thus best bid column sell is highlighted.