Whether you are a newbie or a pro, volatility and options greeks can be perplexing. Find out how to use the Options Statistics and Product Depth tools to get more insight into options trades you may be considering.
you analyze a potential trade, the metrics you use are good only for that
moment in time
what the Options Statistics mean and how to apply them
Know how to analyze relationships between options prices and
other metrics such as options greeks and volatility values
Whether you’re a newbie or a pro, volatility and options greeks can be perplexing. These tools on your thinkorswim® trading platform can help keep you in the loop.
The life of an option trader revolves around making strategy decisions, and that involves analyzing a bunch of metrics such as implied volatility(vol), historical vol, how many puts or calls traded, where they traded with respect to bid or ask prices, and so on. But just knowing the numbers may not be enough. Sure, you may be able to make more educated trading decisions, but you should also know what the numbers mean. We’ll start with some of the options stats.
From the Trade tab on the thinkorswim platform from TD Ameritrade, scroll down to Today’s Options Statistics, which you’ll find below the option chain (see Figure 1). The statistics are divided into three sections:
The Product Depth screen may look like a mess of lines, but each of them has something to tell. When you analyze a trade, the current greeks, vol values, and other parameters are relevant for that moment. But after you place a trade, they’re likely to change, which is why it’s a good idea to analyze the relationship between prices and other parameters. Suppose you want to analyze the relationship between call options prices and delta. Here’s how you could do it using the Product Depth tool (see Figure 2).
Once the curves are plotted, they’ll change in real time. Deltas will be close to 50% for at-the-money options. You can watch how price changes as the options become further out of the money or move in the money.
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