PnL not accurate in ONE compared to IB

Discussion in 'OptionNET Explorer' started by Murphy Tan, Oct 14, 2016.

  1. Murphy Tan

    Murphy Tan Well-Known Member

    Hi all, I found that the PnL for my SPX buttefly is not accurate in ONE compared to that In Interactive Brokers. I'm speculating that the PnL on ONE is based on the mid price of the options where PnL in IB is based on the last traded price.

    Am I doing something wrong? Are my configurations incorrect? The Volatility Surface and Sync are checked. Hope someone can help me.

  2. stevegee58

    stevegee58 Well-Known Member

    IB's P/L isn't totally based on the last. Their algorithm seems to depend on how recent the last price was and also if you're pricing a spread. Spreads are even more complicated. I'd argue that IB's P/L is somewhat suspicious because it's not completely transparent how it's calculated.
    MB and Murphy Tan like this.
  3. Murphy Tan

    Murphy Tan Well-Known Member

    Hi SteveGee58, thanks for the quick reply! So should I be relying on ONE for calculating P/L? I was a little worried when I saw the difference in PnL between ONE and IB is a few hundred dollars. I refresh ONE and the difference is now reduced to about a hundred dollars. Still it annoys me to see such a wide difference.

  4. stevegee58

    stevegee58 Well-Known Member

    I pay very little attention to the P/L shown in TWS. Third-party tools like OV and ONE price their spreads by looking at the bid/ask/mid of the legs that make up spreads. I think this is more accurate.
    MB and Murphy Tan like this.
  5. ACS

    ACS Well-Known Member

    There may have been an order working in that spread which skewed the mid and thus the P&L in TWS. I see that all the time.
    MB and Murphy Tan like this.
  6. Teddy

    Teddy Well-Known Member

    It depends upon the feed. I used Tos for the feed into ONE. What I notice is that I sometimes need the spread value in ONE (ie Tos feed) to put the feed on in IB because it is more favorable. I suspect that IB has an additional layer of volatility in the P&L calculation. Everyday, my P&L drops at the open comes back after an hour and then it looks fine until an hour or so before the close. Then 30 minutes before the close it looks normal again.

    I might put on the exact same trade on Tos and IB to see what happens.
  7. Murphy Tan

    Murphy Tan Well-Known Member

    Hi Teddy, I found that PnL gyrates quite a fair bit in ONE. Is this normal?

  8. Teddy

    Teddy Well-Known Member

    I don't see that in ONE with the Tos feed. It might depend upon the options you are using. The closer to expiration and ATM would gyrate more.

    I suspect that options in the option expiration week would move more because they are more dependent upon supply/demand than on theoretical values.

    I would look at your Gamma value. If it is high, it is normal that it moves a lot .
    If the delta is not too neutral combined with a large gamma, it will move with the market.
  9. Erik

    Erik New Member

    From what I understand here is how IB calculates PNL: when the LAST is between BID and ASK they use the LAST price. If LAST is lower than BID then they use the BID. When LAST is higher than ASK they use the ASK price. This makes a lot of sense to me as they try to give us a conservative estimate of what price we might get if we close a trade aggressivly. But to not get heart attacks :confused: I always watch the midpoint PNL calculation in ONE because the hope to get filled at the midprice when exiting the trade never dies ;)

    Hope that helps, happy trading!
  10. Jack

    Jack Well-Known Member

    I think LAST price should not be used at all. LAST depends on many factors. When was the last time the option was traded? Who knows, who cares? I care about what is happening at the moment bracketed by a proper bid & ask spread. When I was using IB, I always submitted my trades after checking the mid price in TOS. I was burnt many times with bad fills relying on IB's so called "mid" price. For securities with tight bid/ask spread (1 cent to 5 cents, eg SPY, APPLE, MSFT, etc), it may not matter. But for SPX, it is a big deal.
  11. Boomer34

    Boomer34 Well-Known Member

    Thanks for the feedback guys...very helpful
  12. Teddy

    Teddy Well-Known Member

    Jack, You noticed IB's funny mid too? I inch it up from the bid or ask price. I did notice that IB's mid is way off from Tos and it is quite off from what one can get filled.
  13. stevegee58

    stevegee58 Well-Known Member

    The universally accepted mid price for a spread is the combination of mid prices of the legs that make up the spread. However what happens on IB is their back-end recognizes spreads as a separate market. So if someone puts up a bid to buy a BWB then the bid and mid for that BWB will reflect the bid/ask/mid *for that spread*. The bid/ask/mid for the constituent legs no longer match the bid/ask/mid of the spread. If there are no buyers/sellers for that specific spread then the bid/ask/mid will revert to whatever its legs dictate. If you subscribe to the signal service here you'll actually see Dan's and others bids go up when a new RTT is starting. :D

    Tools like option-poption get around this by always calculating the bid/ask/mid for a spread by using the quotes of the legs that make it up.

    I don't know this for a fact but it sounds like TOS always calculates bid/ask/mid for spreads using the spreads' legs.
  14. uwe

    uwe Well-Known Member

    Steve mentioned my spread viewer tool:

    I think it is very useful to get a feeling for the real mid price, but I'm biased - I wrote it. :D
  15. Steve S

    Steve S Well-Known Member

    For IB, use their ActiveX sample spreadsheet to pull the mids of the legs and do the fly calcs on the spreadsheet - very easy, and then you have an infinitely flexible tool.
  16. stevegee58

    stevegee58 Well-Known Member

    Are you able to use that with the 64 bit TWS and 64 bit Java? I've tried using the Excel binding but couldn't get it to work.
  17. Steve S

    Steve S Well-Known Member

    Good question, but I would guess "yes" because I follow the TWS API Yahoo group closely and have never heard of a problem. I'm embarrassed to say that I can't tell whether or not I'm running 32 or 64 bit in either Java or TWS.

    Almost always when someone has a problem with the ActiveX control it's either because they don't know how to handle the control (registration, etcetera) or they don't have the VC++ redistributable installed. I've never had any problems whatsoever on any computer - just run the install package and it works.

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