IB Interactive Analytics improvements

Discussion in 'Trading' started by dlincke, Oct 4, 2001.

  1. dlincke


    The option analytics is a wonderful and much appreciated addition to the TWS platform. But of course there's always room for enhancements. The following is a few things I'd like to see in an upcoming version. Maybe def could relay this to the people in charge of this at IB.

    - Option pricing model. Per the manual, IA uses plain vanilla Black-Scholes for European and a variation of Black-Scholes for American style options. Unfortunately, IB does not disclose exactly what approximation is used which makes me reluctant to rely too much on the values produced. I assume it's probably Whaley for stocks and/or Barone-Adesi/Whaley for stocks and indexes? It would also be nice if the binomial model (Cox, Ross, Rubinstein) could be added as an alternative option for american options in the future.

    - Option model initialization. The initial values chosen by IA's vertical volatiliy skew model to compute theoretical option values are beyond anything even remotely useful with default volatilities in the 1600% range. Why aren't the volatility assumptions initialized to default to the average implied volatility when IA is used on a specific options class for the first time? That would provide much more reasonable default theoretical values. Of course, automatic adjustment to historical volatility would be even nicer but I guess that's beyond the intended scope of the application.

    - Position risk graphs. It would be really nice if a future version could include position risk/profit charting. That would be a logical extension of the portfolio analytics already included in IA.

  2. def

    def Sponsor

    version 1: for free options software i think its pretty powerful. (similar software by other firms have multi-hundred dollar monthly fees). There will be detailed documentation on the web site (if not there already). There will also be many new features and addtiions to come.

    I did hear that better default or implied vols will be the norm. As for the other suggestions, I've toyed with the software a little bit but haven't really had enough time to make informed comments/opinions.

    If I may suggest, try it out for a couple more days and send your requests for improvements to ibmgt.
  3. def

    def Sponsor

    i think i know what the issue is with your vols. if you choose to view yearly vol instead of daily, when you edit the model values the % is off by a factor of roughly 16 (sq rt. of business days). For now change your vol display to daily vol and it will show values you expect. I'll notify programming of this.