Dynamic Skew App

Options Pricing $1,500/month

The Dynamic Skew App (DSA) is a cutting-edge algorithm for Vela’s Metro platform that automates the demanding task of calibrating and maintaining vol curves. With a robust and quantitative pipeline, this tool puts trading back in the driver’s seat. The options trader or market maker need no longer worry about the validity of perceived edge, allowing quick and confident execution decisions. Feedback from traders using the algo suggests that it is positively game-changing and has quickly become an irreplaceable component.

Robust market data handling and modeling logic allow the algo to perform well during all market conditions, and with much less latency risk than in a manual curve update process. The DSA exposes fleeting vol trading opportunities that previously could not be realized.

The algo supports the popular Flexible Spline type vol curves in Metro. User-defined settings allow complete control over market data filtering, graphical curve smoothness, time evolution of the curve, and a variety of risk controls. Three available modes for wing treatment include auto-sloping, tabletopping, and/or user-defined fixed slopes. The algo can identify liquidity crises in realtime and gracefully accomodates degradation in implied vol (IV) information. A detailed report grid supplies the trader with useful vol trading data, allowing better identification of potential opportunities. The algo also supports “multi-skew risk” functionality by allowing trade and portfolio syncing in conjunction with an artificial symbol for the options. For example, this can allow the trader to execute on realtime, fixed skew, Black-Scholes greeks, while simultaneously enjoying the risk management benefits from having the inventory risk analyzed on a floating skew with adjusted greeks and a vol path assumption. The multiple skews may also be different curve types.

Please contact the developer at kevin@axonetric.com with any questions you might have regarding technicalities, client use cases, etc. Visit the Nth Moment website for more information.

Additional Materials

DynamicSkewApp_UserGuide.pdf

(PDF 10157076 bytes)

Video

Play the video below to see the widget or algo in action. Metro NOW gives widgets the ability to work in a similar behavior across several asset classes or exchanges. This keeps usability consistent and promotes high application stability.

Configuration Options

All of the variables below can be configured or modified at runtime. This gives users the power to modify their job behavior throughout the day without having to make code changes.

NameTypeDefaultDescription
optionsinstrumentsthe options expiration to model
curve_update_sensitivitydouble3.0the sigma threshold (0.0 - 10.0) to trigger a vol curve publish
temporal_smoothingdouble3.0curve evolution smoothness: 0.0 (none) - 10.0 (most)
spline_smoothingdouble5.0spline smoothing strength: 0.0 (none) - 10.0 (most)
kernel_smoothingint2kernel smoothing strength: 0 (none) - 15 (most)
option_min_sizeint1the minimum aggregate size for a valid price level near ATM
option_max_spread_widthint20the max. spread width in ticks for a valid market near ATM
underlying_min_sizeint1the minimum aggregate size for a valid price level
model_detailint1spline model detail affects CPU usage: 0=Low, 1=Normal, 2=High
PUT_TBLTOPbooleanfalsedo put wing tabletopping (instead of auto-sloping)
CALL_TBLTOPbooleanfalsedo call wing tabletopping (instead of auto-sloping)
RESETbooleanfalseclear reconstructor and any other saved values in DB
REQTRDbooleanfalserequire at least one futures or options trade before first vol curve publish
CONVEXITYbooleanfalseenforce vol curve convexity prerequisite
EXTREME_VOLbooleanfalseenable alternative processing for extreme volatility conditions
copy_tradesstringsync using format: FromRealSymbol -> ToArtificialSymbol
SYNCCURVEbooleanfalsealso periodically sync the vol curve of the copy trade's artificial symbol
verbosityint1log detail level: 0=Minimal, 1=Basic, 2=Full, 3=Debug
curve_publish_cutoff_timestringin server time zone (PM); e.g. 3:30
iv_upper_limitdouble0.0the maximum allowed IV anywhere on the curve (0=disabled)
control_pt_valsstringoptional comma-separated list of control point X-axis values
fs_wing_slopesstringput wing slope, call wing slope (optional overrides for Flexible Spline)
on_job_exitint10=Do nothing, 1=Abort options expiration, 2=Abort whole options symbol
special_flagsstringKEOD=keep EOD pattern through evening, INIT=user-defined pattern, REQOTRD=require an options trade before first publish, UVPCPO=update vol path's center point only, CTMAN=copy trades for manual trades also

Screenshots

Remember that in Metro NOW, dashboards and widgets can be utilized in both OnRamp and Metro clients.

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