Volatility Trading

The VOL order type allows you to trade volatility, and gives you ways to dynamically manage your options orders.

To trade Volatility

Create a Volatility trading page. The fields used to define and dynamically manage volatility orders will open automatically.

These fields include: Volatility, Volatility Type, Undrl. Range (Low), Undrl. Range (High), Hedge Order Type, Hedge Aux. Price, Continuous Update, and Reference Price Type. See field definitions below.

Create market data lines. You can use the VOL order type for options, index options and combination orders. Note that the bid and ask price fields display volatility instead of price, signified by a percent sign (%). Market data for stocks will still display the bid and ask price.

Hold your cursor over the option's volatility to see the option price, based on that volatility.

Select Annual or Daily volatility using the Volatility Type dropdown list.
Create an order by clicking the Ask price for a Buy order, or the Bid price for a Sell order. The order type defaults to VOL on a Volatility page.

Please note the following requirements for transmitting a VOL combination order:

Combo VOL orders must be Smart-routed, or routed to an exchange that natively supports volatility orders.
All legs must be on the same underlying, and each leg must independently be eligible to use the VOL order type. For example, a BuyWrite order could not be sent as a VOL order since its stock leg would not allow this order type.
All VOL orders must be DAY orders.

To have the workstation calculate a limit price for the option based on your volatility input, enter a value in the Order Volatility field. The value shown in the Imp Vol field is calculated via the Option Modeler.

To transmit the order, click the "T" in the Transmit field, or the Transmit icon on the trading toolbar.

Field	Description
Volatility	If desired, enter a volatility to use in calculating a limit price for the option. If blank, the calculation will use the volatility derived via Option Analytics.
Volatility Type	Select from Daily or Annual volatility.
Hedge Order Type	Select an order type. The application will send an order against the executed option trade to maintain a delta neutral position. Use the Hedge Delta Aux. Price field to set a price for orders that require one. Notes that for index options, you will need to select a futures contract for use in a hedge delta trade.
Hedge Aux. Price	Used in conjunction with the Hedge Delta Order Type field. If you have selected an order type that requires you to define a price, for example a limit order or a relative order, use this field to set the price.
Continuous Update	When checked, the option price is automatically updated as the underlying stock price (or futures price, for index options) moves.
Reference Price Type	Elect to use the NBB (bid) when buying a call or selling a put and the NBO (ask) when selling a call or buying a put, or the average of the best Bid and Ask. This price is also used to compute the limit price sent to an exchange (whether or not Continuous Update is selected), and for stock range price monitoring.
Stock Price Monitoring	Undrl. Range (Low) - enter a low end acceptable stock price relative to the selected option order. If the price of the underlying instrument falls BELOW the lower stock range price, the option order will be cancelled. Merely touching the price does not cancel the order. Undrl. Range (High) - enter a high end acceptable stock price relative to the selected option order. If the price of the underlying instrument rises ABOVE the upper stock range price, the option order will be cancelled. Merely touching the watermark does not cancel the order.