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 firstname.lastname@example.org with any questions you might have regarding technicalities, client use cases, etc. Visit the Nth Moment website for more information.
DynamicSkewApp_UserGuide.pdf(PDF 10157076 bytes)
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.
Remember that in Metro NOW, dashboards and widgets can be utilized in both OnRamp and Metro clients.