Traders looking to execute multiple options trades at one time are about to get a new applet to help them do so – and quicker.
Chicago-based agency broker Wolverine Execution announced the launch of WEX Vega Trader, a new trading applet that allows users to specify a target amount of vega to execute across a range of option expirations and strikes.
The option’s vega is a measure of the impact of changes in the underlying volatility on the option price. Specifically, the vega of an option expresses the change in the price of the option for every 1% change in underlying volatility.
Options tend to be more expensive when volatility is higher. Thus, whenever volatility goes up, the price of the option goes up and when volatility drops, the price of the option will also fall. Therefore, when calculating the new option price due to volatility changes, traders add the vega when volatility goes up but subtract it when the volatility falls.
This new application is only available on the WEX Trading Platform (WTP), Vega Trader helps traders manage risk by allowing them to efficiently take volatility positions.
“With our extensive background and knowledge of options and volatility trading, we built Vega Trader to meet the growing demand from clients for more sophisticated tools for volatility strategies,” said Kevin Kernan, director of WEX Product Development. “Vega Trader expands our volatility and hedging product suite to allow for lists of options to be traded, monitored, and hedged through one simple mechanism.”
According to WEX, Vega Trader meets the evolving needs of volatility traders, including dispersion strategies; event-driven volatility strategies; volatility arbitrage and hedging strategies. Vega Trader’s benefits include: defining a target Vega amount for a specific underlie, automating trading to control the amount of Vega bought or sold for the targeted range of options, the ability to limit the exposure on any one strike by setting a maximum amount of Vega per strike and automatic hedging.
WEX Vega also assists traders loading up to 40 strikes for the underlier by expiration, root, or delta range, gives them monitoring tools that provide an overall status on the achieved Vega, hedge quantities, and P&L.
Lastly, it gives users the ability to select custom algorithmic trading routes, including WEX Sweep for options and WEX Best X for hedging.
