True Delta

Discussion in 'OptionNET Explorer' started by Al G., Sep 5, 2015.

  1. Al G.

    Al G. Well-Known Member

    I know this topic has been covered to death, but why is it that ONE software does not offer True Delta, in reading these posts its pretty clear that if ONE offered the modeling features of OV, that most users would switch to ONE. It just does not make any sense why they do not do this. I currently use ONE and in looking at there Feature Request section, far and away with close to 150 votes is the True Delta feature, i think the next requested feature is Import /Export and ONE mobile (25 votes).

    Can anyone provide insight as to why ONE is not doing this, is it just too costly to enhance the logic, or are there other things at play that are not obvious.

  2. Kevin Lee

    Kevin Lee Well-Known Member


    I can only speculate because I have no inside knowledge of ONE. I believe there could be two potential reasons :

    1. There's probably too much heavy lifting. True delta isn't just tweaking the IV formula, but it requires proper modeling based on historical data to determine how IV will react to market movement for each of the underlying. Having a generic IV model for all underlying isn't going to be very helpful.

    2. Dan doesn't believe OV has more accurate IV and greeks. I know that because Dan talked to me personally trying to convince me so. Therefore, as Dan is ONE's strategic partner, it is logical to believe having OV-styled true delta won't be a priority for ONE.

    Well.... again I can only guess. Perhaps others might have more accurate insider information to share?
    Venkat likes this.
  3. tom

    tom Administrator Staff Member

    Dan is a part owner, not just a strategic partner. I suspect Andy listens to his customers though so he should notice the large demand for more accurate greeks. In my opinion, the modeling is the toughest bit in that type of software. Len's had many more years to refine his models. ONE has a lot of catch up to do with modeling and adding things like futures options.
  4. GreenZone

    GreenZone Well-Known Member

    I'm currently working with Andy (the programmer who makes the ONE software) to try to assist him with implementing and testing more advanced options modelling (Constant Elasticity of Volatility and Variable Variance).
    I've reviewed 3 private betas so far with the above new modelling, and it's looking promising.
    Chuck, uwe, Trader G and 1 other person like this.
  5. Trader G

    Trader G Well-Known Member

    I would renew my ONE in a heartbeat if they could get the same modeling that OV has.
  6. Kevin Lee

    Kevin Lee Well-Known Member

    Good to know that finally they are agreeing that true delta is important. Wish they had done it few years ago instead of trying to convince me that it's not a useful feature.

    But now that I'm so used to the OV method of analysis and learned to deal with the user-unfriendliness of the software, I'll probably not go back to ONE. I'm so dependent now on using the R column to split my trade into multiple parts so that I can analyze a butterfly not as a butterfly but a combination of spreads as well as putting in "what-if" adjustments by using a different value in the R column. I also find the spread window very useful in helping price my entry.
    GreenZone likes this.
  7. GreenZone

    GreenZone Well-Known Member

    Kevin, it would be great to see you demonstrate these OV tips in one of the trading groups.

    If you can't make it to the trading groups, then perhaps a short video recording?
    You can use a free product such as Jing to do the video recording (
  8. Kevin Lee

    Kevin Lee Well-Known Member

    Ron, happy to do that. Let me find time after this busy period to do the video idea since I live in Singapore and there's a time zone issue. At a minimum, i think i can capture screen and write something in pdf. Thank you for recommending the software. Looks good. I can use it for many other things.
    LearPilot and RayM like this.
  9. LearPilot

    LearPilot Guest

    Hi Kevin Lee!
    I appreciate your experienced advice here and I was very thankful if you create such a PDF on this interesting topic.
  10. Kevin Lee

    Kevin Lee Well-Known Member

    uwe, Meteor528 and GreenZone like this.
  11. DukeB

    DukeB Guest

    Based upon what you have seen to date, would you say that I could use their beta software to do reliable back testing regardless of the strategy IE M3, Rhino etc? I don't want to pay for something again that doesn't work.
  12. GreenZone

    GreenZone Well-Known Member

    I can't tell you what to do.....but I can tell you what I'm doing.
    I've cancelled my subscription to OV, and am now using TOS "volatility smile approximation" for my greeks, TOS "individual implied volatility" for my real P&L (which can also be easily seen with ONE), and ONE beta both for backtesting and for a second level of management for my live trades.
  13. DukeB

    DukeB Guest

    If, on your live trades, the deltas are close between ONE and TOS do you assume that the deltas on backtesting would be calculated accurately on ONE?
    We are talking true delta, correct? Or is true delta necessary? I am new and did not realize that delta values could have more than one value.
    I too use TOS. I understand why you use "volatility smile appx" for your greeks. Why the TOS "individual implied volatility" for the real P/L.
    This has been a very frustrating experience for me and I am sure others as well. I don't mean to be a bother, just trying to get my feet on the ground.
    Really do appreciate your help. Thank you.
  14. GreenZone

    GreenZone Well-Known Member

    Because "individual implied volatility" shows your real P&L, whereas the "volatility smile approximation" shows theoretical P&L.

    If you want more information on this topic, watch the prior recorded sessions from Trading Group 2 for more detailed explanations of the options models between the 3 major options software programs (TOS, ONE, OV).
  15. Kevin Lee

    Kevin Lee Well-Known Member

    I think both "individual IV" and "vol smile approx" show theoretical P&L in Analyze tab. For real P&L based on mid price, you need to look at Monitor tab. Individual IV theoretical P&L is closer to real but in some days the difference is appreciable too. The vol smile approx P&L is quite far from real P&L, at least for the type of trades I'm doing.
    RayM and Jay Winger like this.
  16. Kevin Lee

    Kevin Lee Well-Known Member


    I can appreciate your frustration. I've gone through the same exprerience myself. Unfortunately, options modeling is very imprecise. At best, the models are a crude approximation of reality. Among TOS, ONE and OV, none is totally accurate. Greeks cannot be taken at face value, regardless which software we use.

    My personal opinion is instead of trying to find the "best" software that accurately models the behavior of option pricing, i think it is more practical to understand "why" the software is inaccurate and "how" to compensate the greeks manually. By compensating, i mean under what circumstances, we need to add to or subtract from the greeks.

    I know it's much easier if we have an accurate tool that we can all rely on and follow a simple trade plan - ie when delta hit xx, adjust. Unfortunately, I find that to be inadequate in practice. It's probably a reasonable thing to do as we learn a new strategy, but to master it, we really must understand all the market nuances and the inaccuracies of the software tool we are dealing with and then work around them.

    Just my two cents....
    Marcas, Scott Slivnik, Al G. and 5 others like this.

Share This Page

  1. This site uses cookies to help personalise content, tailor your experience and to keep you logged in if you register.
    By continuing to use this site, you are consenting to our use of cookies.
    Dismiss Notice