
# One Easy fix for traders getting stopped out too early or cutting profits too soon

If you’ve traded actively for at least a few months or years, you’ll know all too often the agony that comes
with getting stopped out of a position and immediately, the trade takes off.
A similar but lesser form of agony is felt when a trade has hit your price target and you proudly sell your position.
Except, it keeps going and going...

:::cut:::

I know I’ve felt these emotions more times than I can count.
If only there was some magic indicator which would give me the expected range of the overall market,
I could better set my stop loss and profit taking levels.

Fortunately, I eventually figured out that the VIX index is a simple and solid indicator for this.
[What is the VIX index?](http://www.investopedia.com/terms/v/vix.asp)

I instinctively check VIX throughout the day to make sure it is within "normal ranges" when putting on and taking off trades.
Just take a look at the below chart:

![](chart-1024x588.jpg)
Figure: Data: January 2, 2004 – December 16, 2016

Whenever the VIX is under 17, the S&P500 daily range averages less than 1% (High of day minus Low of day).
And most of the time the VIX is under 14, the S&P500 range averages less than 0.7%.
However, when the index is trading close to 17 or higher, more extreme moves in the S&P500 can be expected with much greater predictability.

Here is a breakdown of the graph in table format:

| VIX Values     | S&P 500 H-L Averages | # of Occurrences | %age of Occurrences |
| -------------- | -------------------- | ---------------- | ------------------- |
| under 11.01    | 0.61%                | 92               | 2.8%                |
| 11.01-14.00    | 0.74%                | 919              | 28.2%               |
| 14.01-17.00    | 0.96%                | 793              | 24.3%               |
| 17.01-23.00    | 1.22%                | 768              | 23.5%               |
| 23.01-30.00    | 1.78%                | 397              | 12.2%               |
| 30.01 and over | 3.35%                | 295              | 9.0%                |

Even traders who do not trade options must pay close attention to the VIX index to avoid exiting positions too early and getting whipsawed.
Equally important, when volatility is low, don’t expect big moves especially in names highly correlated
to the S&P500 index in terms of direction and beta.
In low volatility environments, you must take profits earlier and keep a tighter stop loss.

Here, we’ve provided an easy way to roughly gauge the market ranges for the day, but we could of course dig much deeper.
For instance, we could combine volume, sector and many other factors
in our analysis and come up with more accurate measures of range not just for the overall market,
but also for certain sectors and stocks.

Perhaps, in the future, this analysis will come, but for now, pay attention to the VIX.

Until next time….Always stick with your risk limits and Happy Trading!



# Option Workshop, version 16.10.1194

In our new version, we have added several improvements by request from our users, and fixed some interface bugs, the DDE export bugs etc.
The new version can already be downloaded [from our website](http://optionworkshop.net/download) or through the update system.

:::cut:::

## Strategy templates

In the strategy templates manager window we’ve added some standard options combinations:

- Straddle: +1p, +1c,
- Strangle: +1p-1, +1c+1,
- Strangle 2: +1p-2, +1c+2,
- Strangle 3: +1p-3, +1c+3,
- Vertical bull call spread: +1c, -1c+1,
- Vertical bear call spread: -1c, +1c+1,
- Vertical bull put spread:  +1p-1, -1p,
- Vertical bear put spread:  -1p-1, +1p,
- Calls butterfly: +1c-1, -2c, +1c+1,
- Puts butterfly: +1p-1, -2p, +1p+1,
- Condor: +1p-2, -1p-1, -1c+1, +1c+2.

If you select a template you’ll see in the right part of the window the template formula for creating
a spread and the ‘preview’ of the PnL chart which is built up according to the formula.

![](standarttemplates.png){.thumb}
Figure: Standard strategy templates

Now you can include the underlying asset in the strategy templates: ‘**u**’ means underlying asset.

## DDE export

We have added the option to change the update rate of the data exported via DDE –
The **Update period** parameter is now available in the export settings window.

![](ddeupdate.png){.thumb}
Figure: Update period

You can open the export settings window by using hotkeys **Ctrl+Shift+E**.

## Instrument tree

Weekly options in the instrument tree now display the number of the week.

![](weeks1.png){.thumb}
Figure: Number of the week

## Interface control

To quickly switch between windows in Option Workshop use the hotkeys **Ctrl+Tab**.

![](activewindows.png){.thumb}
Figure: Switching between forms

## Fixed issues

We have fixed an issue with:

- Interface tabs ordering not maintained after restarting the program,
- Main window’s incorrect minimization,
- Historical chart zoom settings when a candle is updated,
- Table columns’ autosizing,
- Fills deletion while deleting a position,
- Net strategy update when adding a position,
- DDE export errors.

Also Option Desk’s column preset list was not updated properly. We have fixed this issue.



# What`s New in Option Workshop version 16.9

September is here and we have a whole new major update to talk about.
There are several new features that have been added to Option Workshop to help our users trade as efficiently and effectively as possible.
Without further ado, I’m going to talk about each of these feature, and what they allow.

![](https://www.youtube.com/watch?v=tGBEaXh2bNU)

:::cut:::

## Spread template manager

First and foremost is our new spread template manager, it allows our users to design custom spreads, and quickly apply them to any option series.
For example, you’ll now be able to design an iron condor and trade it on any series of your choosing at the click of a button.
You can make your iron condor as ‘wide’ or ‘narrow’ as you like, specifying how far apart each strike is
from every other one using a simple relative formula. Have a look at this screenshot for a preview:

![](strategy_template.png){.thumb}
Figure: Fig. 1 – How our new strategy template manager works

For a full explanation of how our formula works, how to design and apply custom spreads,
have a look at this [blog post](../15/strategy-templates-syntax.md).
Personally, it took me about five minutes before I was comfortable using it!
Once you’ve designed a custom spread, you can apply it to any market, and at any strike price.
This means you can compare the price and other parameters of your spread across any option series at any strike price!

## User Interface change:  Fills tab & positions tab

Next up is a cosmetic change to our UI. We’ve placed the fills tab inside the positions tab, so it’s easy to switch between the two,
enabling you guys to quickly see what the fills are on your positions, be they modelled positions or real ones.
The reason for doing this is we found that most of our users weren’t looking at their fills,
but because Option Workshop has powerful modelling features, it’s always worth knowing which fills your position consists of.

![](positions1-1024x180.png){.thumb}
![](fills-1024x180.png){.thumb}
Figure: Fig. 2 – Here is the new location of the fills tab, right next to the positions tab

## Shift function

Thirdly, we’ve now designed a new approach towards tweaking modelled positions.
Our new ‘shift’ feature allows you to change the strike prices of your whole strategy or a particular option within your strategy
in a couple of clicks.
Either click the shift icons to the right of the chart button in the positions tab while you have
a strategy selected to shift a whole strategy, or right click on an individual position within the positions tab [pictured below].
This will give you guys a quick way of looking at your strategies at different strike prices.
Couple this feature with a ‘what if’ scenarios and there are endless permutations for modelling potential strategies!

![](shift.png){.thumb}
Figure: Fig. 3 – How to access the new shift function

## The Option Desk now has new columns

Another change that we’ve added has been to add some columns to the option desk screen.
Now you can see an option’s intrinsic value as well as it’s time value.
This can help contextualise an options total value, and you’ll be able to see how it’s priced on the market relative to these values.

## Historical charts now update in real time

We’ve improved our historical charting feature. Now it updates in real time, allowing you to follow market moves as they develop.

## Changes in calendar spreads charts

If you have a calendar spread of futures on options, and options in this spread have
different underlying futures (different expiration dates, for example ESU6 and ESZ6),
then to build a chart of the risk profile we will:

1. Put an array of the nearest futures on the X axis
2. Use points from the X axis directly to calculate price of options at these points
3. For calculating prices of options on futures with a later expiry, we will shift X points on the rate, which can be set in settings.
   By doing this we consider to be in contango.

## Virtual total strategy

In the positions tab and on our charts, we’ve now added a virtual total strategy.
While before you could combine two strategies to be displayed on a chart at the same time,
the new virtual total strategy will allow you to see your two strategies combined into one.
This allows for a better overall picture of your positions. On top of this,
it means you can combine real positions that are already in your account with modelled positions,
enabling you to see what your trades would look like if you added or removed part of your spread.

For example, let’s say you’re trading a calendar spread and the market has moved.
VTS will show you how potential hedges can affect your risk profile and change your spread payoff.
You can roll the strike prices of your options and see how these will not only affect the individual options payout, but the whole strategy.

Before:

![](before_vts.png){.thumb}
Figure: Fig. 4 – How we displayed spreads in previous versions

And after:

![](after_vts.png){.thumb}
Figure: Fig. 5 - How we can now display the spreads with the Virtual total strategy function

## Quick spread order processing

We’ve also included a new way to quickly open or close already existing positions.
Simply right click on the strategy name in the strategies column, select ‘open’ or ‘close’ and you will be greeted with this screen:

![](quck_open_close.png){.thumb}
Figure: Fig. 6 – The new Open/close spread menu

Where you’ll be able to quickly place an identical order to an already opened/modelled position or you can close your current position.
If you look at the ‘operation’ column, you can see theres also the ability to make custom combinations
with the relevant options that make up the position.
This functionality is particularly useful for executing real trades on already modelled positions.
In effect, once you’ve found a spread model that is satisfactory,
simply right clicking on it’s name and selecting buy will execute it all at once.

## DDE Export and UI changes

With our new DDE export feature, you can export all of the data we receive into an excel file which updates in real time.
This adds even more options for looking at market data and appraising your strategies.

![](dde1.png){.thumb}
Figure: Fig. 7 – Where to click to access DDE functionality

Simply select the DDE server and the table you want to export, and you’ll be able to see the data in real time,
being updated on your Excel spreadsheet.

## Exclude feature

Another interesting feature is the ability to exclude or include certain positions in a strategy total parameters calculations and charts.
This will allow you to see how your strategy would perform if you sold off or hedged out part of your strategy.

![](de_selection.gif){.thumb}
Figure: Fig. 8 – Our simple de-selection process

## Font changes

How we display our positions has changed also. Our font’s are now specific to order type.
Positions containing real fills, are displayed in bold.
Positions containing adjusted fills, are displayed in italic.
The position type column still shows if that position contains real fills or not

## Exchange filter feature

Finally we’ve added a quick feature to filter out unwanted exchanges in the instrument tree.
Simply click the filter icon at the opt of the instruments tree and you’ll be able to limit the amount of exchanges displayed.

## And finally

With all of these new features, Option Workshop is offering a robust options trading package.
We offer some of the best options modelling services on the market,
coupled with all of these new features on top of our already capable software allowing you to:

- Model, evaluate and test different trading strategies using charting and analytical tools, create customizable ‘what-if’
  scenarios, and monitor the current state of the market.
- Quickly create a new custom strategy using easy relative syntax.
- Apply custom designed spreads to any option series
- View the price of any custom designed spread across all options strikes in a series
- Model or trade custom spreads, and then apply ‘What if’ scenarios
  to see how they will perform in different environments given a change in the underlying, or how their risk profile will look when changing their Theta.
- Combine modelled trades with actual positions to allow you to see whether hedging an existing position is a good idea or not.

So go ahead and give Option Workshop a try.
If you have any questions don’t hesitate to [email me](http://michael@optionworkshop.net), or send a help ticket in our software.

Good luck trading guys!

Michael



# Strategy Templates Syntax

**Strategy templates** enable our users to design custom options spread templates.
These spread templates can then be applied to any option series using the **Spread desk**.

## Creating a strategy template

To open the strategy templates manager window, click on the strategy templates icon in the main menu.

![](strategytemplatebutton.png)
Figure: The new updated main menu

:::cut:::

The strategy templates window will appear on screen.
You will be greeted with a screen that has three sections.
The left hand column of the window has a list of templates names.
These can be changed in the upper right hand section.
If you wish to add more templates, simply click the cross in the top left hand of the window.

![](strategy_templates_manager.png)
Figure: The new strategy templates window

The upper middle and right hand portion of the window contains the template name and it’s formula.
The template text field contains the formula for creating a spread.
We have our own custom syntax for making spreads that I will explain in the paragraph below.
Directly below this section, there are five buttons allowing you to add copy save or delete a strategy, as well as cancel working with it.

Finally, the main portion of the window is comprised of the ‘preview’ – this is where the payoff function
of the spread which is build up according to the formula is previewed on the screen.
Note that the Base price and PnL axes are purely theoretical.

Anyhow, let us talk about the syntax involved in the template formula:

- **`c`** means call
- **`p`** means put
- **`,`** denotes a different option, either in type or strike price.

As a default, whenever a new strategy is created, it auto-populates the template formula with one call
and one put at the same strike price.
Consequently, you can see this reflected in the risk profile of the preview:

However, when you look at the template, you will note that there is a number to the left hand side of the `c` and `p`.
These numbers represent the quantity of options to be bought when the strategy is executed / modelled.
Try to change the quantities and see how the preview changes.
Also remember that negative quantities like `-1` are perfectly fine to use, and denote a short position.

As an example, if you simply put `-1c,-1p`, you will notice that the risk profile is inverted, to represent the changing risk profile.
Alternatively, if you put `2c,1p` you’ll note that the risk profile becomes lopsided at a ratio of `2:1`.
Again, this can be explained because the strategy now represents the buying of two calls and only one put option.

But, so far we have only talked about strategies that use the same strike price.
If you wish to have strategies that use multiple strikes, you need to understand that our syntax is relative.
That means, each option strike is positioned relative to every other option in the strategy.
This is done in order to enable easy application to multiple different option series.

To specify an option strike relative to another option strike, simply add a number to the right of the `c` or ‘` p`` figure, but before the next comma. For example, in its simplest form, if you simply specify  `1c-1`, it would indicate your strategy will always purchase 1 call, and it will be at the strike price one below the ‘central strike’ price. `1c-2`therefore would indicate purchasing the same amount and type of options (1c = one call) but, the strike price would now be two ‘steps’ below the central strike price. If there are no relative numbers (IE:`1c,1p`) then the option is assumed to be applied to the central strike price.
Remember: the central strike price is still a theoretical term,
and it only becomes real once you’ve chosen a strike to apply your strategy to.

Try to create your own custom strategy templates. In order to get you started, here are a few examples:

- `1c, 1p` – a straddle;
- `1c+1, 1p-1` – a strangle with a two strike width;
- `1c, -1c+1` – a vertical bull spread;
- `1c-1,-2c,1c+1` – a long call butterfly;
- `1p-5,-1p-4,-1c+4,1c+5` – an Iron condor with a total ‘width’ of 8-10 strikes;
- `1p-10,-1p-8,-1c+8,1c+10` – an iron condor with a total ‘width’ of 16-20 strikes.

## Applying a strategy to a market using the spread desk

Once you have created a strategy template, it can be applied to real markets.
There are two ways to do this. This first way is to select an options series from the instruments tree, right click it
and select the ‘spread desk’ option.

![](strat_desk.png)
Figure: How to access the new spread desk tab

Once you’ve opened the spread desk, simply select which template you wish to apply to the option series,
and it will be applied, showing all of the spreads qualities including price and the greeks.
Then simply select which strike price is appropriate and drag it into your positions tab,
much like the process of modelling options with the option desk.
You’ll be greeted with a screen detailing which account and strategy the spread will go into, as well as a multiplier,
which asks how many spreads to buy (or sell, then multiplier must be negative).
Finally you can specify how the fills will be made. Because it’s a modelled trade, you can specify the ‘best’ (cheapest) bid/offer,
or chose the midmarket price, which is composed of the average of the bid/offer.
Alternatively you can chose the last traded price, which is composed of the last trades of each option in the spread.
Finally you can chose the theoretical price.

![](strategytemplateform.png)
Figure: The confirmation window you should see before executing a custom spread

Below all of these options will be a mini summary of each option contract that is to be traded.
Once all of the criteria are selected, simply press ok and watch the position populate in the positions tab.

A faster way exists to trade strategy templates. Simply right click on an option in the options desk window
and select the spreads templates option. The ‘central strike’ will be the strike that was selected with the right click.

These two methods allow for either an overall view of your strategies for detailed assessment,
or a quick and convenient way to apply it to your modelling and trading.



# Strategy templates

With this post we are going to open a category of publications, where we write about our plans to implement new features into Option Workshop.
We hope these posts will turn into a dialog with users, so everyone is welcome to comment about these post here at our blog,
in our [google plus](https://google.com/+OptionworkshopNetApp) pages
or at the [support portal/forum](http://help.optionworkshop.net/support/discussions/5000040921).

## The need

There are different approaches to options trading.
One of them is trading standard options combinations, like butterflies, vertical spreads and so on.
Beginners can simply buy/sell one of these combinations with the hope that the price of the underlying will be within a profitable range.
Advanced traders will manage the position over its lifetime. But both beginners and advanced traders need
to find a convenient way to observe and discover the best opportunities to open any position.

Traders need a fast way to understand all of the following factors: the price, the greeks, the maximum profit and the maximum risk
if they opens a spread at a particular strike.

Another need is the ability to create custom templates, for spread trades that are regularly put on.
For example, some traders like to trade ‘standard’ butterflies that only have a one strike distance or ‘step’ between the leg and the center.
Others trade a ‘wider’ butterfly with a 2 or 3 strike step between the wing and the core.
With a custom template, it will be possible to specify the difference between the step, be it a 1, 2 or 5+ strike distance.
Additionally, because of it’s flexibility, you could build the butterfly out of calls or puts, or any combination of both.

:::cut:::

## Syntax

We plan to create a simple syntax for describing combinations in relative form,
i.e. without binding it to a concrete underlying, series or strike.

Let’s start with an example of a combination description in a format which we’ll consider now:

```
1c-1,-2c,1c+1
```

This is a description of a simple long butterfly made up of call options.
Let’s see in detail how this syntax works:

1. The template description row consists of several parts split up by a comma.
2. The first part is `1c-1`.
   It by-turn consists of `1c` and `-1`.
   `1c` means "one bought call option", `-1` means "at strike which lies one step down to the **central strike**".
3. The second part is `-2c`.
   It doesn’t have a second fraction like `-1` in first part.
   It means that it describes the central strike.
   So `-2c` means "two sold call options at the central strike".
4. The third part is `1c+1`, meaning "one long call option at a strike one step higher than the central strike".

**Central strike** is a term in the description above.
It is the strike that the spread is built up around.
If we build the spread above at a central strike of 100 (with the step distance between the strikes being 5), then:

- `-2c` – is two short calls at a strike of 100;
- `1c-1` is one long call at a strike of 95;
- `1c+2` is one long call at a strike of 105.

If we build it at strike 110, then all strike in the list above must be increased by 10.

Here are a few more examples:

- `1c, 1p` – a straddle;
- `1c+1, 1p-1` – a strangle with a two strike width;
- `1c, -1c+1` – a vertical bull spread.

## Templates editor interface prototype

![](templates-manager-form.png)
Figure: Templates editor interface prototype

The layout for a template editor seems to be very simple.
See the image above. It will have the list of default and user defined templates and two interface elements for editing:

- A text field for the template name;
- A text field for the template formula.

For clarity it will be useful to add a small chart, that will show a qualitative risk profile at expiration (payoff function).

## Use of templates

### Quotes and other parameters

![](spread-desk.png)
Figure: Spread desk

There is a class of traders who think in terms of prices of option spreads.
For example, if someone trades butterflies regularly, then it’s natural for him to think of the butterflies price.
IE: “how much is the bid and the offer for a butterfly trading at the 100 strike?”.
Or, what is the current delta/gamma/vega value for this spread and so on.

For these traders it’ll be convenient to have a table, which will show all the parameters of a particular option spread
with all the different strikes (all possible combinations within an options series).
The image above illustrates a prototype of this.

### Quick strategy creation from template

Simple and obvious functionality. If a trader wants to model a position in an options spread,
at the moment they need to manually add a position in each leg.
It is very flexible and gives the ability to model absolutely any options spread, but it’s time consuming in a situation,
where the user needs to model something standard.

What we want to do is to give users the ability to add their butterflies/condors/strangles into a modelling account or strategy in a single click.
In the context menu of a row in the options desk the software will show the item **Templates**
with subitems titled by existed templates names. After the user clicks on an item, the following form will appear:

![](create-strategy-form.png)
Figure: Create strategy form template

The form will require a user to choose an account, where he wants to add a modelling position,
a strategy name (new or existing) and a multiplier – a value at which a number of legs in each leg of the template must be scaled.

What do you think? Tell us here in the comments or anywhere on our social networks pages.


Blog #option-spread

One Easy fix for traders getting stopped out too early or cutting profits too soon…

Option Workshop, version 16.10.1194

What`s New in Option Workshop version 16.9

Strategy Templates Syntax

Strategy templates

Last thing