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Wednesday, May 1st 2019

ORATS Speaks to the Wall Street Journal About the Fragility of the Options Market

ORATS speaks to the Wall Street Journal about the fragility of the options market

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Summary

ORATS spoke to the Wall Street Journal about the fragility of the options market, citing data that shows bid-ask spreads widen to extreme levels during times of volatility. ORATS provides execution help to clients implementing systematic, backtested strategies, using their deep databases of market activity to predict the best ways to execute a strategy.

We were interviewed by the Wall Street Journal for their article, Traders Are Fleeing the Options Market

As this graph shows, the options bid-ask spread spikes (blue line) when the options implied volatility spikes (orange line).

We expect some widening with increases in implied volatility but the increases far outpace expected widths based on predictive models.

The data is from bid-ask spreads from near-term, around the money options quotes of the component stocks from the S&P500.

The results show that in tumultuous times, when reasonable options bids and offers are needed most, the market may not be there.

One of the services we provide to our clients implementing our systematic, backtested strategies, is execution help. With our deep databases of market activity, we can predict the best ways to execute a strategy.

A link to the Wall Street Journal story is here and a link to the** ORATS site is here**. Please contact me to find out more about the data used in the graph or to utilize our API to construct the graph or read about our Historical Quotes here.

Disclaimer:

The opinions and ideas presented herein are for informational and educational purposes only and should not be construed to represent trading or investment advice tailored to your investment objectives. You should not rely solely on any content herein and we strongly encourage you to discuss any trades or investments with your broker or investment adviser, prior to execution. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. Option trading and investing involves risk and is not suitable for all investors.

All opinions are based upon information and systems considered reliable, but we do not warrant the completeness or accuracy, and such information should not be relied upon as such. We are under no obligation to update or correct any information herein. All statements and opinions are subject to change without notice.

Past performance is not indicative of future results. We do not, will not and cannot guarantee any specific outcome or profit. All traders and investors must be aware of the real risk of loss in following any strategy or investment discussed herein.

Owners, employees, directors, shareholders, officers, agents or representatives of ORATS may have interests or positions in securities of any company profiled herein. Specifically, such individuals or entities may buy or sell positions, and may or may not follow the information provided herein. Some or all of the positions may have been acquired prior to the publication of such information, and such positions may increase or decrease at any time. Any opinions expressed and/or information are statements of judgment as of the date of publication only.

Day trading, short term trading, options trading, and futures trading are extremely risky undertakings. They generally are not appropriate for someone with limited capital, little or no trading experience, and/ or a low tolerance for risk. Never execute a trade unless you can afford to and are prepared to lose your entire investment. In addition, certain trades may result in a loss greater than your entire investment. Always perform your own due diligence and, as appropriate, make informed decisions with the help of a licensed financial professional.

Commissions, fees and other costs associated with investing or trading may vary from broker to broker. All investors and traders are advised to speak with their stock broker or investment adviser about these costs. Be aware that certain trades that may be profitable for some may not be profitable for others, after taking into account these costs. In certain markets, investors and traders may not always be able to buy or sell a position at the price discussed, and consequently not be able to take advantage of certain trades discussed herein.

Be sure to read the OCCs Characteristics and Risks of Standardized Options to learn more about options trading.

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The opinions and ideas presented herein are for informational and educational purposes only and should not be construed to represent trading or investment advice tailored to your investment objectives. You should not rely solely on any content herein and we strongly encourage you to discuss any trades or investments with your broker or investment adviser, prior to execution. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. Option trading and investing involves risk and is not suitable for all investors. For more information please see our disclaimer.
Interactive Brokers is not affiliated with Option Research & Technology Services, LLC and does not endorse or recommend any information or advice provided by Option Research & Technology Services, LLC.