Recently my in my trademonster account, they have added some nice new risk tools. The tools are very easy and intuitive to use. It allows you to first see visually the risk profile of the position you are about to put on, you can have single legs or multi leg strategies. There are two tools: Snapshot Analysis and Spectral analysis.(See pictures above).
Snapshot analysis: Gives you risk profile, probabilities of max profit, loss, and break even. It also calculates your risk/reward and future events to consider that may effect your position.
Spectral analysis: Allows you to see visually the profit/loss areas, it also allows you to play what if scenarios by making adjustments to price, volatility, or adding and/or removing pieces of the position. It calculates the Greeks. It also calculates the probability of a stock landing in a current trading range.
I am sure I have left out some of the functionality of this tool. But my point is that if you guys want a tool to help better understand risk, and to play what if scenarios with your position that you may want to open a trademonster account which is free to use these awesome tools.
I am convinced that I will only use IB to execute my trades because of the low commissions and trademonster for charts and risk management and generating ideas. It is a much more intuitive and visual appealing platform. I hope that eventually trademonster will move away from the minimum commission per order so that I can move my trading back so that everything is in one platform. Trademonster is by far the best platform I have ever used.
Above I gave you guys a few screen shots on the risk profile and other metrics of a real position of mine in STEC.
ReplyDeleteYou will notice that the implied volitility is at about 86%. I was playing with the change in implied volility in the built in option pricing model on the spectral analysis tool. I moved the IV from 86% to 65% by Dec 6th 2009 to see what kind of gain I could potentially see if price stays at around $14 an IV is at 65%.
Based on the pricing model it says that I would be able to capture about 32% of the gain or $570 of the total $1800 that I collected for selling these puts.
I will be interested to see how this plays out.