The Quant Option for Options Trading
We see the continuous rise of algorithmically driven financial markets as a positive industry change. The necessity driven change brings more practical, data-driven, and vastly more efficient markets. At Quantitative Brokers (QB), our mission has always been to build intelligent algorithms for trading to help clients of all sizes, and geographies, be more efficient by: optimizing workflows, electrifying mundane tasks, all while providing better trading execution and analytics along the way. We are constantly innovating. Last month we announced the re-launch of our Striker algorithm, strategically built for options on futures markets. The algo is a 2-in-1 strategy with enhanced price discovery utilizing the new synthetic target pricing feature and the original arrival pricing capabilities.
Options on futures volumes have increased globally and follow a wide range of investment opportunities, varying from treasuries, equities, commodities and agricultural contracts. Recently, the Futures Industry Association (FIA) released data showing global futures and options trading volume had reached ~44.7 billion contracts YTD (Jan to Nov 2021), an increase of nearly 33% compared to 2020, with options leading the volume trend. Trading options is a labor-intensive task, often involving multiple counterparts, brokers, traders, and is an optimal product where price discovery and execution have not been prioritized, until now.
With Striker 2.0, we have sought to simplify and enhance our ability to see beyond the screens and at a scale beyond human capacity. Think of hundreds of brokers trading on your behalf, except, it’s QB’s complex systems orchestrating intelligent algorithms simultaneously. One of the most valuable enhancements within the new version of Striker, as mentioned previously, is the smart price discovery mechanism. Traders could not see inside of minimum tick increments; Striker can provide quotes instantly, making price discovery only a click away. Synthetic markets are liquid, available, but often unseen without technology. Striker is providing the efficiency and transparency this market was missing. In addition to trading efficiencies, Striker can quickly scope a market where multiple human traders would have previously been involved, reducing redundancies in the workflow.
We didn’t stop there. Striker 2.0 contains a series of enhancements. We display the Fair Value (real-time pricing) using cointegration and implied pricing calculations, alongside our enhanced placement logic at the child order level. Since the release of Striker 2.0, QB has been able to improve on the bid/ask of the trades we have executed. On average, we have saved our clients $5.50 per lot; for those trading large options trades, this can be a significant amount.*
“Striker 2.0 TCA - Our graphical representation maintains the integrity of the options trade”
Our decisions are based on data and we want to provide accurate execution analysis for our clients. We knew it was imperative to re-design our Transaction Cost Analytics (TCA) to fit the options on futures markets. Our graphical representation maintains the integrity of the options trade, and it does not divide the option as a 2-part execution of an options and futures leg, but as one synthetic trade. This is paramount for accurate execution analysis. We invite you to take a look at our realistic simulator and contact us if you would like to understand more about improving your options on futures trading.
Quantitative Brokers
November 11th, 2021
New York, NY
* Performance quoted represents past performance and does not guarantee future results.