wrote in asking if there's software that tracks options' implied volatility in real time.
wants to know if there's a Web site offering specific recommendations on option software.
wonders if there's options software that can incorporate his customized options trading formulas and graphing.
Fellas, the answer is yes, yes, and yes!
Buying option software is a lot like buying a car. You probably don't need to invest in a Lamborghini if all you need is a second car to haul the kids back and forth to school. And whether you spring for a Diablo or a Winstar, you'll want to test-drive the thing.
So, decide how many bells and whistles you need first. If you're a recreational covered-call writer, you don't need as much analytic horsepower as someone relying on options trading to make a living.
The hardest thing to do, of course, is to choose the right package from all the offerings. And there's a lot of option software out there nowadays.
The best source for current software reviews is the
Traders' Resource section of the
Stocks & Commodities
Web site. There you'll find well-organized synopses of software package capabilities. The
data allow easy side-by-side comparisons.
Common to all, of course, is the options analysis component. From that perspective, software packages are pretty much the same. The difference is in the "extras" that accompany the basic package. Cost and software demands on your computer round out the "big three" in my book.
data, you can set up a table, like the one I've constructed, which compares software features. Of course, weigh each of the categories for their relative importance according to your own preferences or constraints.
certainly has an impressive array of features, its cost and demands on your hardware may make you flinch. The real value proposition here seems to be
Of course, nothing beats getting behind the wheel for a test drive. Once you've surveyed the offerings, you'll want to take the software out for a spin before plunking down the $800 to $2,400 for the package. Demos, as disks, downloads or "risk-free" trials, are available from all reputable vendors:
- Option Station 2000i:
Having It Both Ways
It's my understanding that I can't use stop-loss orders for options. Is there anything I can do to protect the gains in my long calls without selling the contracts outright? How can I continue to participate in further upside moves while hedging my profits? -- Tom Wegmann
For those unfamiliar with stops, they're known as contingent orders, triggered by market movement to or through the stop price. Once activated, they become market orders to sell or buy.
Exchange rules don't prohibit the use of stops. Floor brokers, in fact, often hold stops in their decks. Stops, however, aren't incorporated as part of an exchange's electronic public order file, or "book," in trader lingo. Only limit orders from public or retail customers go into this file and queue up for execution. Limit orders have their execution prices on the market side opposite a stop order. A limit order to sell, for example, is placed in the book above the current market and can be filled only at or above the limit price.
Sell stop trigger prices, in contrast, are placed below the market price. Buy stops are set above the market, while buy limits rest below prevailing prices. Got that?
Tom, it's your brokerage firm that's the roadblock. Some firms just don't want their floor brokers' decks cluttered with stop orders, especially if they have limited electronic order file capacity or sparse floor coverage. For them, it's a liability management issue.
What to do? Well, you could try to find a brokerage firm that
accept option stops. Instead, there are some basic options (and yes, the pun
intended) available for locking in your profits, short of holding pat or liquidation:
- Roll up: Sell the calls and, after pocketing your original investment, and maybe some profit, buy as many out-of-the-money calls as you can afford with the balance. Obviously, this strategy bespeaks a continuing and adamant bullish stance. Keep in mind that selling and buying commission costs can be substantial.
Spread: Hold the long calls but sell out-of-the-money calls against them, ideally taking in enough premium to recoup the original investment, plus a profit. This can be a "safer" approach, since flat or rising markets (to a point) pad your profits, while insulating you from losses in a falling market. Selling commissions, again, are a drain.
Brad Zigler is TSC's itinerant options curmudgeon but nonetheless welcomes your
feedback. Any strategies discussed, including examples using actual securities and price data, are strictly for illustrative and educational purposes and are not to be construed as an endorsement, recommendation or solicitation to buy or sell securities. Examples presented do not take into consideration commissions, tax implications or other transaction costs, which may significantly affect the economic consequences of a given strategy. Options involve risk and are not for everyone.
TSC Options Forum aims to provide general securities information. Under no circumstances does the information in this column represent a recommendation to buy or sell securities.