Powerful Tools for Analyzing Options Volatility

Option Workbench’s tools give you advanced capabilities to determine the risks associated with different options trading strategies and to find profitable trading opportunities.

The major option analysis tools are summarized below.

The Dashboard

The Dashboard has three sections: the latest market commentary from the Strategy Zone, the IV (Implied Volatility) Histogram and the VIX (Volatility Index) Term Structure chart.

Implied Volatility Histogram

The IV Histogram provides a broad-spectrum rich/cheap analysis of the equity, ETF and index options markets. The IV Histogram is an important first step in deciding how to apply the powerful Option Workbench filters to option profiles. Watch a related tutorial.

VIX Term Structure

The VIX Term Structure chart shows the values of spot VIX and VIX futures prices. The VIX Term Structure is an important indicator of the option market’s short-term view of equity prices.

The Back-Testing System

The new back-testing system enables you to test your positions on historical data before you execute a trade. You can set up hypothetical positions in the past under similar market conditions, generate a back-test report and decide on the best trading strategies.

The Option Pricing Sheet

The option pricing sheet is a unique display of option data similar to reports used by floor traders. It shows a matrix of rows containing option prices, implied volatility and Greeks grouped by strike price, and columns with calls and puts grouped by expiration dates. This layout allows you to view more data at a glance than the collapsible single-month layouts used by most broker pricing screens, accelerating your analyses and decisions.

You can use the most recent market data by editing the underlying price as well as each option price and implied volatility cell. Doing so automatically recalculates the option Greeks.

The Implied Volatility Chart

This chart presents a graphical view of the implied volatility smile for each expiration date. It enables you to identify a potentially profitable skew at a glance.

Implied Volatility Chart

You can select what the chart shows, such as the range of low and high strikes and the IV that is charted – the call IV, the put IV or the average of the call and put IVs.

The Expected Return Calculator

The expected return calculator is at the core of the risk analysis capabilities of Option Workbench. Given a specific volatility profile, there are often many strategies that meet a given set of criteria. The expected return calculator gives you a formidable set of tools that enable you to compare and contrast different spreads with respect to potential profit and risk. With the sophisticated volatility scenario analysis tools, you can test your predictions of future volatility and their effect on your strategies.

Expected Return - Options

The Volatility Study

The volatility study provides you with a unique perspective on closing price movement and volatility. Its upper chart displays a traditional close price line graph, augmented with a bar chart that shows how many standard deviations the price changed from the previous close price. The number of standard deviations is calculated based on your choice of the 20-, 50- or 100-day historical volatility.

Volatility Study

The lower chart shows the time series of the currently selected statistical volatility and the option’s composite implied volatility.

The Price/Composite IV Trend Chart

This new chart in the Volatility Study shows how price and composite IV interact over time. Subscribers have used it to build winning trades and, equally important, avert potentially losing ones. As far as we know, no other option trading software offers a chart like this.

Price-Composite IV Trend Chart