Saturday, October 12, 2013
Nearly Limitless Options at TradeStation
The online broker introduces a new platform that allows subscribers to access its options trading system directly, bypassing the Web browser.
TradeStation, a sophisticated online broker appealing to the kinds of frequent traders who enjoy building their own high-powered systems utilizing lots of technical and fundamental analysis, has expanded its options capabilities. The interesting new platform is downloaded onto your computer, letting you access TradeStation’s options trading system directly and bypassing your Web browser.
One of the more intriguing tools on its options platform, OptionStation Pro, even allows you to change what the application looks like on your screen. An “appearance” tab is built in; clicking on it lets you access a variety of skins, or the graphical presentation, and fonts, allowing you to personalize the platform. You can make the letters bigger or adjust the color scheme to light blue on maroon if that pleases you.
Most options trading platforms have the Black-Scholes options pricing model built in, which when first published, legitimized the science behind options markets and led to a boom in trading. This pricing model was originally designed for European-style options, which can only be exercised on their expiration date. OptionStation Pro enables you to switch to the Bjerksund-Stensland option-pricing model, which is theoretically more accurate than Black-Scholes when it comes to American-style options. These options can be exercised on any trading day on or before expiry.
Black-Scholes calculations are in wide use among traders, mainly because they’re quicker to execute, but with the speed of today’s computers, you aren’t likely to notice a difference. So, you now have a choice of pricing models.
Another enhancement to the options pricing models is the automatic use of the 13-week Treasury bill rate (^IRX) rather than manual entry of an interest rate. TradeStation calls this feature “hands-free interest rate updates.”
The firm added what it refers to as the “SpreadMaster” feature. This allows you to create custom spreads in both theoretical and real positions using drag and drop functionality. If you have multiple spreads on the same underlying symbol, you could keep track of them in whatever configuration you want. If you have an iron condor, for example, which has four legs, you could break it up into two vertical spreads, which have two legs, and monitor each independently. You could also close the verticals separately.
SpreadMaster gives you a lot of control over how your options positions appear. You can set up theoretical spreads and drop them into your existing portfolio to assess the change in risk. You can also drop a theoretical spread into the order bar, execute it, and then drag and drop the components into the configuration you want. This is a very advanced options management tool, but one that should make creating and managing spreads much easier.
There were several changes to the OptionStation Pro order bar, including the automatic display of the estimated maximum risk and reward, as well as the estimated cost of the order and the theoretical profit and loss. If you set up an order that has the possibility of being rejected, you’ll see a message that prompts you to fix it before hitting the Place Order button.
If you want to roll a contract or spread with up to two legs to a future month, click on the position and then choose the new strike date and price. If you want to roll a four-legged spread, you’ll have to break it into two two-legged spreads and roll those; you can recombine the resulting positions into a four-legged spread if you want.
Janette Perez, TradeStation’s vice president of strategic relations, says, “We take you where you’re at when you come to TradeStation, and help you move forward.” She says the platform itself offers coaching to help you become a more sophisticated trader, intelligently guiding you towards the tools that let you make the trades you want.
The firm recently launched an iPad app as well as an Android tablet app; TradeStation was one of the last holdouts on the mobile front.
ANOTHER TYPE OF ONLINE TRADING: A couple of weeks ago, I made a quick visit to Chicago. While there, I was invited to appear on tastytrade.com, an online financial network, and had a great discussion about online trading with Tom Sosnoff and Tony Batista, tastytrade founders and former market makers. I stuck around and watched the guest who appeared after me, and was very intrigued by his Website, Raise.com. (Click here to see the segment in which I appeared.)
George Bousis, the co-founder and CEO, has set up a site that allows people to trade gift cards. Did your Aunt Maude give you an Olive Garden card for your birthday that you don’t want? You can sell it on Raise.com though you’ll take a hit on the balance of 8-13%, according to the information displayed on its Olive Garden page. Raise.com takes a 15% commission on sales; if you as a buyer want a physical card, that will run you $1 per card. Electronic gift cards are free.
There are hundreds of gift cards for sale on the site, from Sears to Nike to Victoria’s Secret. It’s easy to search the cards available if you’re a buyer, and also pretty simple to place a card that you own on the market. Check it out.
Published in Barron’s, October 7, 2013.