Pre–trade analytics features for listed options on SaxoTrader Desktop

Among other features, Saxo offers pre-trade analytics features for the listed options on SaxoTrader Desktop 

This article covers the following the following features:

• Probability envelope chart
• 3D Volatility Chart
• Volatility smiles charts
• The Historical Volatility chart (HV)
• The At-the-Money Implied Volatility Forward Curve (ATM IV Forward Curve)

Probability envelope chart

A feature that allows you to have a visual reference for the probability that a market will be trading within a certain price in the future. 

For example, on this chart of TSLA, a probability envelope of 68% or one standard deviation (default setting) is illustrated. The interpretation is that throughout the lengths and width of the Envelope, the market has a 68% probability of prices staying within this range. As time increases so does the price range that the market has the probability of reaching. 

3D Volatility Chart

You can visualize the volatility surface of an option instrument in 3D. This three-dimensional plot shows the implied volatility of an instrument’s options that are listed across different strike prices and expirations. 

The 3D plot displays:

• Strike Prices
• Days to Expiry 
• Mid-volatility

Volatility smiles charts

The Volatility smiles chart refers to the shape of the graph. The ‘smile’ shape results from plotting the strike price, which is the fixed price at which the owner can buy or sell the option, with the implied volatility of a group of options with the same underlying asset and expiration date. 

Implied volatility rises when the underlying asset of an option is further out-of-the-money (OTM) or in-the-money (ITM) compared to at-the-money (ATM).

You can select up to 5 expiries to compare the deformation of the smiles across those expiries. The volatility smiles show that ITM and OTM options tend to be more in demand than ATM. Implied volatility is impacted as demand drives prices.

The Historical Volatility chart (HV)

With the historical volatility chart, you can visualize on a line chart how historical volatility has evolved over a given period.
Historical volatility (HV) is a statistical measure of the dispersion returns for a given security or market index over a given period.

The At-the-Money Implied Volatility Forward Curve (ATM IV Forward Curve)

Forward curves provide important information regarding supply and demand in commodity markets. For example, if prices are generally falling into the future, it could indicate that there is a supply shortage in the market. For equity futures, forward curves are highly dependent on interest rate and dividend expectations. These dynamics appear in options prices and can help you identify opportunities.

See the examples below:

Gold

AEX index