Trading is an incredibly competitive world where capturing any and every edge is essential to ultimate success. Often the difference of success and failure can be measured by the quality of execution.  

Every trader will have winning trades and losing trades. The key to success is in limiting your losing trades and maximizing your winning trades. Efficient execution means the difference between a large losing trade and a marginal losing trade, breaking even or making a marginal profit and a successful trade vs. a substantial winner.  

The Rival One Options functionality offers options algorithms to ensure your orders are capturing the appropriate amount of edge and helps you get a more efficient level of execution on your trades.  

Rival One offers four algorithms that are specifically geared towards options: Volatility Orders, Auto Hedging, Minimum Edge and Contingency Orders.  

Volatility Orders 

The Rival One volatility order algorithm allows you to place orders based on volatility instead of price. The system works the options or options spread order in the market tied to that volatility level. As the underlying price moves, the price of your options order will automatically update based on Rival’s option pricing model to maintain the volatility level you selected.  

This algorithm is utilized by volatility arbitrage traders who analyze the difference between the forecasted volatility of the stock with the implied volatility of an option and wish to enter and exit the options market at specific volatility levels. 

Auto hedging 

The Rival One Auto Hedging algorithm automatically hedges send an order to trade the underling instrument as soon as you’re filled on an options order. The quantity of the hedge order will be set based on the delta of your options trade. The combination of the options delta and underlying delta will give you a delta neutral position. 

The algorithm is most often used by traders who carry a position and wish to minimize their Delta risk on trades throughout the day. It is a limit order that goes into the top of book. Additional capability, currently being developed by Rival One, will allow traders to work an auto-hedge order using other execution algorithms. 

Minimum Edge 

The Minimum Edge Order algorithm ensures your order will get filled with the appropriate amount of edge. When you place an option order you set the desired edge level (difference between Rival theoretical price and market price). If the price of your order does not meet the minimum edge requirement at the time you send the order, your order will be rejected. If the order does meet the minimum edge criteria and is sent to the market, the system will automatically cancel your order if the underlying price moves to a point where your order no longer has enough edge. The Minimum Edge Order algorithm protects you from volatile moves, maintaining your predetermined edge level to get filled.  

This algorithm is best used in volatile markets to provide protection to the user. The user does not have to monitor each order as closely as the algorithm monitors them for you. 

Contingent Order 

The Contingent Order algorithm is used when you want to trade an option only after you get filled on an underlying future or equity. It is similar to a reverse hedge, where you trade the underlying first, and then you trade the option.  The system will work the future or equity order tied to the option market you want to trade. If your order in the future or equity gets filled, the system will automatically send an order to trade the option with a quantity based on the fill quantity of the future or equity order. If the option market price changes the system will automatically cancel the future or equity order. 

This algorithm works well if you want to capture edge in an option market as soon as the underlying price moves. 

Those are the options specific algorithms that can only be used for options, however, Rival One’s suite of algorithms such as bracket orders, OCOs and trailing stops developed for stocks and futures can also be utilized for options.  

To learn more about all of the options functionality that Rival One has to offer, watch our demo or schedule a time to talk with us today!  

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