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How Your Trading Platform Can Help with Math: Stats on Stats

November 13, 2013

Not all traders aced math. Some even had that recurring dream where they showed up for the test—with no pants on. The reality is traders need statistics. thinkorswim® tools have you covered.

An options trader and a statistician walk into a bar. They hit it off and together create tools that whittle down tricky math into a few clicks that can help traders understand a big options market. Thought I was telling a joke, did you? No joke. Just a happily ever after.

This marriage of minds created a thinkorswim platform tool called Today’s Options Statistics. It breaks down daily options volume into calls and puts. It then sorts by options sold at the bid or below, options bought at the ask or above, and options caught between the market. This allows you to quickly and easily view the entire spectrum of options on an underlying security.

Had enough yet? Good, because there’s more (I assume you answered no).

You can carve up your list into greater detail. For instance, you might uncover the delta values of traded options. Delta helps you surmise how much the price of an option might move relative to its underlying security or index.

The tool also looks at patterns. For instance, the Sizzle Index® feature takes a look at where the volume of the options and the underlying stock are at today relative to five-day average volume. So, if the Sizzle Index reading is 3.00, 30 contracts are trading compared to the five-day average of 10. Sort of makes you want to look for the story behind the numbers, doesn’t it? Why are these particular options in such hot demand today?

FIGURE 1: VIEW OF TODAY’S OPTIONS STATISTICS ON THINKORSWIM® Once on the platform, hit Trade tab > All Products > enter symbol > expand Today’s Options Statistics or Options Time & Sales. For illustrative purposes only.

There’s more. A closer look at implied volatility (IV)and historical volatility (HV) can help uncover market intelligence. It’s right there on your toolbar, too. The IV and HV percentiles shown on the tool offer a quick comparison between where these numbers stand today and their 52-week high and low. So, for instance, the higher the volatility, the greater the premium priced into the options.

We even managed to work in the volume-weighted average Price (VWAP) within this tool, which can help you determine if a security might be overbought or oversold. We won’t spook you with the VWAP equation, but if you want a peek at the calculation, check it out here. Enough on stats? Good, because we’re done for today (I assume you answered yes).

thinkorswim Learning Center

Thanks to the thinkorswim Learning Center you are just one click away from an illimitable amount of knowledge. The Learning Center has an extensive archive of tutorials, how-to guides, and more that will help you take advantage of thinkorswim's many features.

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