Interactive Brokers TWS Options Chains for Mosaic Webinar Notes

Overview

TWS Option Chains are designed to fit into the tiled Mosaic workspace while still providing relevant option chain data and trading capabilities. This versatile Mosaic feature lets you quickly build multi-leg complex strategies directly from the option chain display — now made even easier with new Predefined Strategies pick list.

Mosaic Option Chains

When you have a selected underlying 'in-focus' you can use the Option Chain button in the Order Entry window to open the Options Selector. You can also access the Option Chain window from the New Window button.

Mosaic Option Chains
  • The nearest expirations (Last Trading Date or LTD) are listed in tabs across the top. Weekly contracts are displayed in yellow text and monthly/quarterly contracts are displayed in white text.
  • The Calls appear on the left and Puts appear on the right of the center Strike Price column.
  • Click More? to display all available expirations, including weeklies and quarterly expirations when available.
  • List View or Tabbed View — Both views show Calls on the left and Puts on the right and both display the color coded strike price in the center column. You can easily toggle between the different layouts using the View? dropdown list.
    • Tabbed View shows LTD and days to expiry information in each tab.
    • List View shows LTD and days to expiry in center column.
    • TWS remembers the last view you selected and will open it the next time you use the tool.
  • Option chains have shaded background to show at-a-glance if the contract is in-the-money (ITM) or not. Shades of blue designate ITM contracts, shades of black indicate out-of- the-money (OTM) for both calls & puts.
  • Change the number of visible strikes or specify strikes to be displayed by standard deviations using the Strikes?.
  • Hover your cursor over a Strike price to view a tool tip with the Standard Deviation from the underlying’s current price at each the strike.
  • Select the trading class or multiple trading classes (where applicable) in the symbol dropdown in the upper right corner of the window.
  • The Implied Volatility reading for the selected expiry is displayed in the upper right.

Configure Option Chains

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

Configure Option Chains

Create Options Orders

In the Option Chains, click the bid or ask price of the selected option to create a trade.

– click on the ASK price of a call or a put to create a BUY order
– click on the BID price of a call or a put to create a SELL order

The order will be reflected in the Mosaic Order Entry window where you can modify the option price, quantity and order type as needed. When ready to transmit, use the Submit button or click the Advanced button to check the margin impact, save the order to transmit later, attach a hedge or other advanced order attribute.

View the working order in the Mosaic Activity Monitor.

Strategy Builder

Use the Strategy Builder button to easily build complex, multi-leg strategies in the Option Chains by selecting the Bid or Ask price of a call or put to add a leg to your strategy.

Manually Create a Strategy leg-by-leg

To create custom strategies in the Strategy Builder:

click on the Ask price (blue) of an option to add as a BUY leg
click on the BID price (red) of an option to add as a SELL leg.

Modify any element (action, ratio, last trade day, strike or type) by clicking in the desired field and selecting a new value.

Manually Create a Strategy leg-by-leg

Predefined Strategies

A new Predefined Strategies pick list has been added.

  • 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.
  • Select a predefined strategy and hover over the 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 to:

  • 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 Watchlist button adds the complex multi-leg position as a single line in the current watchlist.
Predefined Strategies

Option Spread Grid

This grid interface, accessible from the Option Chain title bar, can be used to easily compare prices, spread tightness, Delta, and Gamma across a range of similar strategies.

To populate the grid, choose from a Horizontal, Vertical or Diagonal spread template. The grid layout appears with the view centered near the current strike price.

  • Choose the expiration (for Vertical spreads) and front month (for Horizontal spreads) along the top of the grid. For Diagonal spreads, use the Front/Back drop-down arrow to select a front and back month.
  • Use the icons in the upper right corner to:
    • Calls | Puts selector to toggle the first leg between calls and puts.
    • Select a time period to evaluate
    • Specify a Trading Class or Choose to Show / Hide Weeklys
  • Bottom and side scroll bars let you scan and compare.
  • Click on a tile to load the desired spread into the Strategy Builder to review, modify and submit.
  • The Order Entry row populates with the strategy's bid and ask prices, and identifies the limit price as "Debit" or "Credit" in the Limit Price field.

Submit the Trade

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

  • Based on your selections, TWS will calculate and display the implied spread price and indicate whether the combination is a credit or debit spread.
  • Choose from the basic order types as well as: Relative + Market, Limit + Market, Trailing Relative + Market and Trailing Limit + Market. These spread order types 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 combination types could help increase the chances of all legs in the order being filled. Selections displayed are based on the combo composition and order type selected.
Submit the Trade

The Advanced+ button in the strategy builder order panel gives you additional choices:

  • Click Stock Leg button to insert a stock leg for the current underlying. For example: to create a buy-write (covered call). Click the bid price to sell the selected call, then from the advanced+ button you can insert a stock leg to create the buy write.
  • Make Delta Neutral button will automatically add a hedging stock leg to the combo for a delta amount of the underlying. Use the system calculated delta or enter your own.
  • Check Margin/Performance button provides the Margin Impact value before you submit the combination order. Note that the same value is displayed in the confirmation box if/when you submit the order.
  • Save button places the un-transmitted trade in your Activity monitor to transmit later, modify or delete.
  • Submit button will activate the trade.

Note on Spread Pricing

Because you can build either a debit or credit spread using the same contracts, pay attention to the pricing conventions for debit/credit spreads:

  • 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.

Always check your trade before transmitting!



Performance Profile for Complex Strategies

The + Profile helps demonstrate the key performance characteristics of an option or complex option strategy — before you submit the trade. You can also access from the Strategy Builder Order Entry row advanced+ button > Margin/Performance.

Performance Profile for Complex Strategies
This tool includes:
  • An enhanced Quote Details window that show the Return/Risk Profit Probability and the potential Max Return and Max Loss; new data points have been added for Breakeven, Profit Probability and more.
  • 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 % price move in underlying price on the P&L. To see the Greeks, adjust the Date in the Scenarios tool bar.

A new drop down in the Scenarios panel of the Performance Profile window lets you choose between displaying the "Instrument Greeks" that show the traditional contract Greeks, and the "Position Greeks" calculated using (Greek value x position), are identified in the Scenarios panel with a "P" prefix.

For strategies that use different underlyings, "Instrument Greeks" are not available and the selector is disabled.


Complex Multi-Leg Positions

View spread and other complex multi-leg positions as a single line entry in your Portfolio tab and in the Account Information window. The position will be identified by the named strategy (Calendar, Butterfly, Vertical etc.) where applicable. Drill-down with the "+" icon next to the complex position title to view individual legs.

TWS shows the named strategy for your spread position along with the net market value, average price, and realized/unrealized P&L for the position. You can add this complex position to any of your Watchlists — with the Strategy Builder Add to Watchlist button or manually use Copy (Ctrl+C) and Paste (Ctrl+V) to add to a blank line in a watchlist/ monitor.

Use Global Configuration > Display > Ticker Row to choose whether to view or hide complex positions.


Close a Spread from your Portfolio

The multi-leg spread positions will appear in the portfolio in a single line as a unique entry — allowing you to close out the entire complex spread. Right-click on the complex position then select Close. Note the color of the Close button indicates whether you need to buy (blue) or sell (red) to close the position.

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

To close or roll each leg of the spread individually — start with the "+" to expand the complex position to show each held leg. Right click on a leg and choose Close or Roll from the right-click menu.

Close a Spread from your Portfolio

Close One Side of Multi-Leg Spreads

You can also choose to close just one side of a multi-leg option spread that has more than two legs, like an Iron Condor or Box, using the right-click menu in your Portfolio window. For available strategies, two buttons show in the right-click menu to "Close Combo Calls" or "Close Combo Puts".


Roll Builder

Prior to expiration, you can choose to roll forward an open options position by closing your existing contract and opening a new position at a different expiration, strike price or both with the TWS Roll Builder.

Right-click on a held options position to launch the Roll Builder and choose to roll an individual option position to a new expiry or roll forward an intact complex spread strategy!

Note the color of the Roll button indicates the buy/sell action for your held position.

The Mosaic Roll Builder opens with Option Chains listed by Expiry and Strike price at the top of the window. Additional LTD and strikes can be added using the buttons in the upper right.

Select the 'roll to' contract for each leg. When adding roll-to contracts, TWS pre-selects the buy/sell action to logically match your original combination.

Roll Builder

Exercise Options with Early Exercise Notification

Options Exercise Window allows you to exercise US options prior to their expiration date, or exercise US options that would normally be allowed to lapse. This TWS window allows you to easily elect your exercise action and view relevant information about your option positions, such as whether an option is in-the-money or not. Access the Options Exercise window from the Mosaic Account menu.

The Option Exercise window displays actionable Long positions in the top half of the page, and non-actionable Short positions in the bottom half of the window.

  • Show All drop down lets you choose all option positions, those for the upcoming expiration or ex-div, or just those expiring in the next 10 days.
  • Optimal Action field displays when the values of any of your US options positions would be maximized by exercising prior to a dividend. In these cases, you will also receive an email, via the IB FYI functionality, two days before the stock trades ex-dividend.
  • Scheduled Action use this field to instruct TWS to either exercise or lapse the contract
    Exercise — select to exercise your entire position in that contract
    Partial — identify a portion of the position to exercise or lapse
    Lapse — only available on the last trade date
    The instruction is displayed similar to an order row. Click "T" to transmit the instruction before the cut off time, or right-click to Discard.
  • For all short positions in OCC stocks with dividends, TWS will project whether the option will be assigned or not. In cases where the dividend estimate is conservative, the dividend amount will show an asterisk with a note "The actual dividend is expected to be slightly higher, which would result in more strikes being exercised or assigned early."

Accounts that hold dividend-paying positions that may be affected by early exercise will receive notification via IB FYI email and in the Option Exercise window in the Optimal Action field approximately two days before the underlying goes ex-dividend. (Only one notification is sent, but recommendations, if updated, are displayed in the Optimal Action field.)

You can also automatically exercise US dividend-related stock and ETF options. If you select the Automatic Action, in Account Management > Settings > Account Settings > IB FYI set up. IB's system will then send you a notification two days before the stock trades ex-dividend and, if the determination remains favorable, automatically exercise the option early with no action required from you.

Exercise Options with Early Exercise Notification

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

Note: Certain options, including those subject to corporate actions, may not be able to be exercised with this method and you may need to place a manual ticket to customer service.




Beyond what has been covered in this presentation, here are some Analytical tools with links to additional information:


Options Analysis Tools


Options Strategy Lab

Evaluate multiple complex option strategies tailored to your forecast for an underlying with the Options Strategy Lab. Plug in your estimate for a Stock or ETF and TWS will return a variety of option strategies that are likely to have favorable outcomes with your forecast. You can analyze each potential strategy to find one with the lowest price, highest risk/reward ratio, largest maximum gain or smallest maximum loss based on your price or volatility parameters.

Probability Lab

The Probability Lab SM offers a practical way to think about options without the complicated mathematics. Use the Probability Lab to analyze the market's probability distribution, which shows what the market believes are the chances that certain outcomes will occur. Adjust based on your own forecast.

Use the grab-and-pull bars in the dynamic market-implied Probability Distribution to create your own custom Probability Distribution. Always see your prediction alongside the market implied calculation.

Volatility Lab

The Volatility Lab provides a snapshot of past and future readings for volatility on a stock, its industry peers and some measure of the broad market. Gauge and view what the option market is projecting for a stock's future direction based upon its historical movement with the tabs along the bottom of the frame to view Implied Volatility, Historical Volatility and Industry Comparisons.