Volatility Based Matching Engine

Optio allows users to transact in volatility terms.

Volatility Quoted Options

Optio allows market makers to send orders in volatility terms. This allows maker orders to live longer and be more competitive than price based orders that must be continually updated as the underlying market moves.

There are two order types that facilitate transacting in volatility space.

VolOrder - [Buy/Sell] [Order Size]

A VolOrder is exactly like a standard limit order, however instead of specifying an order price, the user specifies a Black-Scholes volatility. These orders are used by market makers to provide liquidity.

Parameters

• Sigma - The volatility 'price' of the order as a percent (62.5 = 62.5% Vol)

• Days Per Year Override - Scale factor for 't' in Black Scholes (default = 365.0)

• Interest Rate Override - Default of 0.0, use this parameter to specify an interest rate

• Growth Rate Override - Default of 0.0, use this parameter to specify the growth rate of the underlying.

HedgedVolOrder - [Buy/Sell] [Order Size]

A HedgedVolOrder is a VolOrder with an important additional feature-- this order allows firms with an Optio market maker relationship to execute an automatic delta hedge at the time of fill. See the Automatic Delta Hedging page for details.

The delta of the option is computed using parameters of the order and the current underlying price. It can be overridden with a parameter below. Parameters

• Sigma - The volatility 'price' of the order as a percent (62.5 = 62.5% Vol)

• Days Per Year Override - Scale factor for 't' in Black Scholes (default = 365.0)

• Interest Rate Override - Default of 0.0, use this parameter to specify an interest rate

• Growth Rate Override - Default of 0.0, use this parameter to specify the growth rate of the underlying.

• Delta Override - Use this value to override the Black Scholes Delta (range 1-100)