Equity Option Trading
Equity Option is a flexible financial instrument or a contract which gives its holder the right to buy or sell it at a specified price called the strike price on or before its expiration date. Usually 100 shares of the underlying stock make up an equity options contract. The option's price is called the premium which the investor needs to pay to get rights over the equity option. The types of equity options are call and put. Call option enables the holder to buy the equity option at a specified strike price while put option allows the holder to sell the equity option at a specified strike price on or before the expiration date.
Calculation of the equity option price on a specified date by taking all the factors into account is a major requirement for Equity Option Trading. Trade Smarter is an institutional-grade options pricing platform by Options-Quant which accurately calculates the strike prices of equity options on specific dates. Some of the major features of this platform have been discussed here.
Multiple pricing models
Trade Smarter is equipped with over 125 pricing models for equity options including the popular models such as Monte Carlo, Jump Diffusion, Black-Scholes, Merton-73 and American Options. The traders get many options of pricing models to exploit the inefficiencies of the market to determine the correct strike prices of the equity options.
High level of accuracy
Trade Smarter provides a number of proprietary and academic approximation models to choose from to the traders. The approximation models are designed to calculate real-time pricing of the equity options with high level of accuracy. The models used by this platform include Romberg’s and Polynomial.
Comprehensive data
Correct data is an essential requirement to make the correct decisions in Equity Option Trading, regardless of whether the trader is a newcomer or a seasoned player. Apart from the pricing and approximation models, Trade Smarter platform also provides instructions, concept breakdowns and other kinds of data required to make informed decisions.
In addition to equities, this platform also covers other kinds of options such as FX, futures and fixed income. The models and data have been curated by researchers associated with leading institutions.
Other features
Trade Smarter has been developed using C++ programming language. As a result, it works in close proximity to the processor and is able to use complicated models to process thousands of equity and other kinds of options at a very high speed.
The platform is downloaded after purchasing it. The application is accompanied with documentation detailing the concepts and working of each and every function. It is designed to work on Windows only.
Conclusion
Trade Smarter platform is highly useful for equity options traders to make call or put decision based on the model value of the equity option relative to its current price. It is also useful to determine event based mispricing and risk management.
Collapsible content
What is this platform?
The Options-Quant platform is an options pricing engine that is used to calculate inefficiencies in option prices according to various different pricing models. This includes options on futures, FX, equities, and fixed income. The models featured are used in various hedge funds, and are curated by researchers at leading Universities.
How do I use it?
Upon purchasing, you will receive a digital download of the application as well as a robust documentation that outlines the concepts, explaining how each function works.
E.g.; The overwhelming majority of our users make trades based on the model value of the option relative to the current market price. If MertonJumpDiffusion model estimates the price of an option to be lower than what the market price is trading at, the trader shorts the option and vice-versa. This strategy, also known as relative value trading, uses the platform to exploit pricing inefficiencies.
Can I make trades on the platform?
Currently, the platform is only meant for pricing the options. To submit trades you must use a third-party brokerage, like Robinhood or TD Ameritrade.
Which operating systems are supported?
Currently, we only offer the platform on Windows devices.
Does the platform use any external data?
The platform relies only on user-entered parameters. It does not connect to any external data source or API.