Options Algorithms are different to Algorithmic Trading of Options(ATO) or Smart Order Routing of Options(SORO). ATO is about using the popular cash world algo strategies like VWAP, TWAP, MOC etc, on options. These slice, dice and schedule an order to avail the most profitable execution price. SORO, on the other hand, has to do with executing the trade with the cheapest transaction cost. The different routing channels to the exchanges, MTFs and dark pool, provide the factiliy to sweep through different liquidity providers, hunting for the most economical way to execute an order. This will, for example, take into account the various exchange based tariff and cancellation rules.
Options algorithms, go beyond both of these, to involve logic that takes into account option sensitivities. The strategies generally consist of rules based on the option greeks -Delta, Gamma and Vega. A few of them are :
Some example ATOs implemented by UBS - http://advancedtrading.com/articles/229402648
1. Options TapNow: Seeks to minimize market impact while intelligently seeking aggressive execution up to a limit price.
2. Options Premium Trigger: Allows you to place an options order that is relative to the price of the option premium, rather than the underlying security.
3. Options Float: Allows you to float your order in the market pegged to the passive side of the spread.
4. Options Hidden: Holds your order off the exchange until your desired price is available.
5. Sweep Display: Aggressively sweeps at the market until the order is filled or no longer available, posting on multiple markets simultaneously.
6. Sweep No Display: Aggressively sweeps at the market until filled or no longer available. Unmarketable orders are held back until the displayed price is in your limit.
7. Sweep IOC: Executes a wave of immediate or cancel orders across multiple markets simultaneously, cancelling any residual unfilled shares.
Options algorithms, go beyond both of these, to involve logic that takes into account option sensitivities. The strategies generally consist of rules based on the option greeks -Delta, Gamma and Vega. A few of them are :
- Volatility Pegged Orders
- Delta Pegged Orders
- Volatility Dispersion Orders( for indices)
- Automated Delta Hedging
- Automated Gamma Hedging
Some example ATOs implemented by UBS - http://advancedtrading.com/articles/229402648
1. Options TapNow: Seeks to minimize market impact while intelligently seeking aggressive execution up to a limit price.
2. Options Premium Trigger: Allows you to place an options order that is relative to the price of the option premium, rather than the underlying security.
3. Options Float: Allows you to float your order in the market pegged to the passive side of the spread.
4. Options Hidden: Holds your order off the exchange until your desired price is available.
5. Sweep Display: Aggressively sweeps at the market until the order is filled or no longer available, posting on multiple markets simultaneously.
6. Sweep No Display: Aggressively sweeps at the market until filled or no longer available. Unmarketable orders are held back until the displayed price is in your limit.
7. Sweep IOC: Executes a wave of immediate or cancel orders across multiple markets simultaneously, cancelling any residual unfilled shares.
1 comment:
Good stuff buddy!
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