TWS OptionTrader Webinar Notes

Overview

The TWS Option trader is a single, standalone screen that provides a complete view of streaming option chain data to create and manage single and multi-leg options orders with the Strategy Builder. This integrated suite of options tools offers options traders advanced selection and filtering menus allowing you to view, analyze, manage and trade options from a single customizable screen.

optionsTrader overview

The OptionTrader shares common TWS elements to view market data and monitor the change in price of the underlying while you create and manage orders view executions and evaluate risk with real time position updates in this stand-alone window.


Access OptionTrader

  • From Mosaic New Window Button choose More Advanced tools > Option Trader.
  • From Classic TWS use the toolbar icon or Trading Tools menu.

OptionTrader Components

The trader tool layout at the top of this window includes multiple panels to monitor the price of an underlying, display option chains, Greek risk measures, as well as create and manage option and spread orders, all on a single customizable window.

OptionTrader Components

Quote panel

  • Real-time quotes allow you monitor price movement of the underlying. Customize with select market data fields. Use the wrench icon to add/remove fields.
  • Use the + tab to add multiple tabs for separate underlyings.
  • On a blank tab title bar, the underlying field retains previous symbols accessed in the dropdown list.
  • The "T", "S" and "B" icons above the right side of the Quote Panel allow you to easily toggle between showing/hiding the toolbar, statistics and button panels.

Statistics Panel

Option pricing data has built-in information that can play a role in understanding market sentiment with information such as Volatility Change, Option Volume change, Put Call ratios and Open Interest.

If not visible, activate the Statistics panel with the “S” icon above the quote panel. Use the panel’s configuration wrench to find all available fields.


Button Panel

  • Provides quick-click access to trade actions with customizable buttons.
  • Configuration wrench icon lets you create/edit button actions.
  • Order actions can be “Armed” for instantaneous order transmission.
  • Buttons will be grayed out if not applicable – for example if you have no position, the Close Position button appears inactive.

Order Management Panel

This panel is used to manage your option trades with separate tabs by underlying to create/edit/transmit orders, view executions and current market value for held positions in the underlying and its derivatives. Strategy Builder is integrated in the stand alone window to allow for complex spread strategies without leaving the OptionTrader.


Option Chains

Options chains are listed by Last Trading Date (LTD). Tabs across the top of the panel show upcoming expiries. Monthly contracts show white text while available weekly contracts display yellow text.

Option Chains more dropdown

Click More? to display all available expirations, including weekly, monthly and quarterly expirations when available.


  • List View or Tabbed View - Both views show Calls on the left, Puts on the right and the color coded strike price in the center column. You can easily toggle between layouts using the View dropdown list.
    • The Tabbed View shows LTD and days to expiry information in each individual tab.
    • The List View shows the contract LTD and days to expiration in the center column.
  • Change the number of visible strikes or specify the strikes to be displayed by standard deviations using the Strikes? drop down
  • Strike price background is shaded to give you an at-a-glance look to determine if the contract is In-the-Money or not. Shades of blue designate ITM contracts, while shades of black indicate OTM for both calls & puts.
  • Hold your cursor over the strike price to reveal a pop-up box Standard Deviation relating to the required movement from the prevailing price of the underlying to reach the strike price. Note: Standard Deviations can also be plotted on TWS Charts using the Estimated Price Range in Chart Parameters box.
  • Select the trading class or multiple trading classes (where valid).
  • The Implied Volatility reading for the selected expiry is displayed.

Show Volatility

Show Options Prices and Volatility in a tooltip - when enabled in Global Configuration > Volatility and Analytics you can simply hover your cursor over the Bid or Ask price of contracts in the option chains to view the premium price in volatility terms.

With the Toolbar enabled, the Show Volatility button lets you view all option prices in volatility - instead of the option prices.


Configure OptionTrader

Right click on column headers in any of the panels or use the Configuration wrench icon to access Global Configuration screens - for example customize the option chains with the Greek risk measures Delta, Gamma, Vega, Theta, etc.

Open multiple underlying option tabs, by selecting the + tab and defining the underlying.

Closing the OptionTrader window resets the tool to its default values. To retain multiple OptionTrader tabs minimize the window-DO NOT close.



Create Options Orders

In the Option Chains section:
  to create a BUY order – click on the ASK price of a call or a put
  to create a SELL order – click on the BID price of a call or a put


Order Management Panel

Order management trade panel

Orders tab

When created, an order row appears on the Orders tab with default values. Edit order criteria then Transmit. Order remains visible until filled. Executions can be viewed on the Trades tab.


Trades tab

View filled orders for current trading session. For Spreads, use the plus icon to expand and view individual fill prices for each leg.


Portfolio tab

Displays held positions with P&L for the underlying and any of its derivatives.


Strategy Builder

Use the Strategy Builder tab to create complex multi-leg spreads from the option chain display. Now made even easier with the new predefined strategies list.

Strategy builder

Predefined Strategies

A new Predefined Strategies pick list has been added.

Predefined Strategies

  • Identify the weekly, monthly or quarterly LTD to display in the Option Chains window.
  • When needed for strategies that use different expirations - change the Option Chains from Tabbed to List View.
  • From the Strategies drop down, select a predefined strategy. Then hover over the Bid/Ask price for the initial leg, TWS highlights the other legs that will be included in the strategy.
  • Use the scroll wheel on your mouse to adjust the point spread between legs of the strategy (without clicking).
  • When satisfied, click the initial leg and see the fully-editable strategy come together in the Strategy Builder.
  • The named strategy appears below the legs as you build the spread.
  • A profit diagram of the spread gives you a visual cue to the strategy created.

Use the buttons along the bottom of the Strategy Builder:

  • Clear All Legs - to remove all legs from the current strategy and start fresh.
  • Profile - to view the strategy P&L or any of the Greeks as a function of the underlying price.
  • Add to Quote Panel button adds the complex multi-leg position as a single line in the current Quote Panel. You will be prompted to add the legs of the spread as well.

To construct option spread strategies:

  • Click on the Bid or Ask price in the option chain panel to add a call or put as a leg in creating the spread strategy.
  • The strategy you are creating displays in the Strategy Builder window, and is updated each time you add/remove a leg. Options used in the spread are highlighted in the Option Chains. Strategy graph is drawn to the right as you specify each leg.
  • Modify the Action, Ratio, LTD, Strike or Put/Call designation with the drop down selections. As you make adjustments the Order line in the Strategy Builder updates.
  • Click Add Stock to insert a stock leg for the current underlying.
  • Make Delta Neutral inserts a stock leg for the current underlying and will automatically add a hedging stock leg to the combo for a delta amount of the underlying. Use the system calculated delta or specify your own.
  • Based on your selections, TWS will calculate and display the implied spread price with a pink tick dot and indicate whether the combination is a credit or debit spread.
  • Add to Quote Panel button creates an implied price line in the Quote panel, with optional rows for each leg of the spread. Click the Bid/Ask price to create the spread order or transmit directly from the Strategy Builder. This implied quote line can be added to any TWS Quote monitor or watchlist.
  • You can Transmit the order directly from the Strategy Builder tab or choose to add to the Quote Panel. The spread is clearly defined in each order row and on the Order Confirmation window as a Credit(C) or Debit(D) spread.
  • Always check your trade before transmitting. Hold your mouse over the Contract field to verify which option contracts will be sold and which will be purchased.

Submit the Trade

When the Strategy Builder is activated, a specialized Order Entry panel appears with the order parameters. Click the Submit button to transmit the order.

  • Additional combination types can be found in the Order Types drop down that may help increase the chances of all legs in the spread order being filled: Relative + Market, Limit + Market, Trailing Relative + Market and Trailing Limit + Market. These spread orders add liquidity by submitting one or both legs as a relative order. Once the first leg fills, the second leg is submitted as a market or limit order (depending on the order type used).
  • The additional spread order types displayed are based on the combo composition and order type selected.
Combo order types

Note on spread pricing:

If you buy a spread and you owe cash (debit spread), use a positive limit price. If you buy a spread and will receive cash (a credit spread), enter a negative limit price. Conversely, if you sell a spread and receive cash, enter a positive limit price. If you sell a spread and owe cash, you must enter a negative limit price. So remember:

  • Buying a positive price, or Selling a negative price - pays a debit to the other side of the trade.
  • Buying a negative price and Selling a positive price - collects a credit from the other side of the trade.

Credit or Debit spreads are identified in the Strategy Builder, order row and on the Order Confirmation window.

To exit a spread position, go to your Portfolio tab. Right click on the complex spread line and select Close button. Note color of close button indicates whether you will buy or sell to close.

  • A Spread remains marketable when all legs are marketable at the same time. A missing Bid or Ask price in the spread implied price indicates one or more of the legs have become unmarketable.

Performance Profile for Complex Strategies

The Performance Profile helps demonstrate the key performance characteristics of an option or complex option strategy, before you submit the trade. If Order Previews are enabled, use the Profile check box to open the Performance Profile.

This integrated performance profile, allows you to quickly and efficiently compare, analyze and modify these strategies before placing your trades.

Performance profile

This tool includes:

  • An enhanced Quote Details window that show the Return/Risk Profit Probability and the potential Max Return and Max Loss.
  • A Performance Graph that shows the P&L (or any of the Greeks) as a function of the underlying price; use the drop down menus to change the display from P&L to any of the Greeks or select a future date between now and the last trading date.
  • The Scenarios window displays the effects of a change in underlying price on the P&L, the Greeks, and the volatility of a position. Select % price move and expiration date for various scenarios.

IB FYI Notifications

IB FYIs are email notifications sent based on your account holdings.

  • A notice is sent three days before US options expire.
  • For accounts that hold dividend-paying positions that could be affected by early exercise an FYI is generated two days before the underlying goes ex-dividend.
FYI Dividend-Triggered

To better understand the mechanics of dividend-related early exercise, see the IB Knowledge Base article Considerations for Exercising Call Options Prior to Expiration.