Looking for options trading simulators...

[JamieSorres]

Dear forum users,

I am looking for an options simulator either an online or an offline one. I have used the one @ simulator.investopedia.com but i don't think it has a capability of selling options short.

I will greatly appreciate if you can give me a hint on where to look for options simulators. Any information or links will be greatly appreciated.

Jamie.

 

[Strategic Trader]

no simulator can replicate real options trading - at least for the US market ( i note you are from canada and i only know about US options) - since most options are illiquid which coupled with the fact there are multiple exchanges and that posted exchange prices are only indicative and the exchange can choose wether to hold, hold and fill, or fill your order , so it would be impossible to create a realistic simulator

 

[ColinRiche]

"selling options short" don't you mean writing options ?

ST - can you explain what you mean by - "hold, hold and fil or fill your order"

i would of thought S+P options on futures would be pretty liquid
i just started looking at them the other day

 

[Strategic Trader]

"selling options short"

i assume he means selling a put - equivelant to going long the underlying

exchanges are able to sit on your order even after you cancel it and even then charge you for cancelling an order that they did not fill, even though they were showing size at the price you put the order in at - but chose not to give you a fill

there are liquid options - obviously those at the money for high profile stocks etc - but those same options become illiquid etc if the underlying moves away and then a new option strike takes over - so with regards to a simulator - it just could never give a true view of trading options - even futures simulators are dubious - but options are multiple levels of complextiy above futures

 

[ColinRiche]

selling puts or calls naked, you are in effect writing

ST - assuming we are at the top of a run would you rather buy a put or sell a call ?

any experience with options on IB or is it not the broker where the problem is but the exchange ?

 

[Strategic Trader]

CR

well, i personally never use the word 'write' as i trade naked options, so i just think of it as selling - and even if i did do covered options - i would constantly trade in and out of them - so i guess i would still think of it as selling and not 'writing"

re choice of 'buy a put or sell a call ' , the choice is of course also extended to the strike - so i would choose the one that offered the best value - and in fact - i would only ever trade an option, if it was undervalued, regardless of wether the underlying was at the top or bottom of a run - since there is no way of knowing for sure if the underlying is at the top or bottom of the run - but an incorrectly valued option offers a quantifiable risk/reward opportunity - and you need to take advantage of the wide spreads ( percentage wise ) on options - not trade against the spread

the issues with options originate with the rules surrounding option trading in the US, but is exasperated by brokers such as IB which charge a cancelation fee when you cancel your option order ( even if you only cancelled as you didnt get a fill - even though the price was posted when you put your order in and even long after you cancelled)

in general when you are trading options - you are always trading against real professionals - unlike stocks or futures - so you better make sure you are on top of your strategy, and it should
allow for whatever the issues are and hopefully make sure you still come out on top!

 

[stevecartwright]

I have traded options for sometime, on and off, and generally sell/write PUTS through ODLSecurities. I have been reasonably profitable and haven't experienced the above problems as it has been mainly telephone based for selling and I get my fill confirmed more or less immediately.. Can Buy online to close if needed. I am also looking at IB for daytrading the DOW and was thinking of extending my other activities to IB as well. The above comments may change my mind. I sell PUTs as I don't have to watch the screen all day and its easy to make some money as I do my day job.

I have tried Stangles and looking at Bull ratio spreads at the moment so if any one wants to make a comment, polite please, I am always looking to learn, even after 10 years of doing this stuff.

Option simulators you can try the Hoadley addins to Excel. hese are excellent and give you a considerable amount of flexibility. I have built spreadsheets that will give you prices based both on time and alsoprice changes. If this link doesn't work just srearch google for "Hoadley". (www.hoadley.net/options/options.htm)

Regards
Steve

 

[Strategic Trader]

stevecartwright

unfortunatly - you will always get an immediate confirm of a fill if you get a worse than market price! getting a good fill needs a bit more work - you might find it interesting to set up an ib account and check the price you receive from your current broker with the best price on IBs platform - who knows - you might end up giving up the day job because you are making way more money from options

 

[stevecartwright]

stevecartwright

unfortunatly - you will always get an immediate confirm of a fill if you get a worse than market price! getting a good fill needs a bit more work - you might find it interesting to set up an ib account and check the price you receive from your current broker with the best price on IBs platform - who knows - you might end up giving up the day job because you are making way more money from options

Thats the plan. Whats the chance of arbitrage between brokers if I am being offered different prices, just as a thought.

 

[Strategic Trader]

stevecartwright

you can arbitrage between market makes - but not brokers since they are just going to give you wider than true spread - they dont cross prices - and in fact you may find that you are just buying options the broker ( phone) is holding himself - so he is going to want more - not less - since he can get a bonus over and above the commision that he is going to charge anway - so a buy price will cost you more than the market price and a sell price will be worth less than the market price - hence no arb!

 

[Josh M.]

sp options are very liquid.

the only feasible way I can see to simulate trades for options is to construct theoretical option prices using a pricing model. I think this is what TS is doing.

 

[Strategic Trader]

only problem with that is that i presume people would want to simulate trades with prices that were based on real life events - and not prices that are based on a theoretical calculation

 

[TheBramble]

Not really my area, but could you use one of the pro firms options pricing for a given option (or series) and feed that in to your theoretical pricing model as a 'seed' value? It should then better reflect current volatility etc.

 

[Strategic Trader]

options pricing for at least US options is very complex ,since there are multiple exchanges offering the same options at different prices, and as the underlying price changes and with liquidiy changing as different options move in and out of the money, there is a big difference between last trade prices, and posted ask/bids, and add to all that, the fact that the exchanges can choose wether to accept a trade, even when they are showing size at a posted price - all in all - it is possible to create a fairly good simulator for futures using a reasonable thought out algorythm, but impossible to create a simulator for options which would give support to offering a good basis to judge any planned methodologies from prior data

 

[TheBramble]

Well, it was just a thought.

since there are multiple exchanges offering the same options at different prices

Leads me to think a spot of arbing would be a distinct possibility.

Is that a reasonably frequent opportunity in these markets?

 

[Strategic Trader]

complex - since there are a lot of negative paramaters to trading against option market makers who are the ones who effectivly control option trading - and would tend to pull spreads rather than cross prices -

plus they can bust any trade that goes though if they feel like it - so you might find yourself a few hours later holding one side of what you thought was a closed arb trade, with the side you are holding running up a healthy loss ( a dollar stock drop for 20 contracts is

and you can also find yourself paying brokerage for a cancelled lmt order if you use a retail opton broke

and even if they are showing size - it does not mean they need to fill you

but yes - arbing options is done all the time - and done correctly its a fairly low risk strategy, but with limited profit potential

 

[TheBramble]

Sounds like a nice level playing field...

 

[flyingeagle]

try optioneasy from www.liffe.com

 

[JamieSorres]

Thanks everyone for the discussion!
Espesially, thanks to stevecartwright and Josh M. for the links you provided.
This is one of the best forums I have posted in so far.
Thanks again.

 

[henry766]

i agree with strategic , options are something that seems like a good idea at the time , till you try and get out get filled or just plain trade em , nooooooo liquidity what so ever as far as i'm concerned!!