Experienced options traders do more than just buy puts or sell calls. They know how to buy cheap and sell dear. They also know that options can be used as a strategic investment, letting the trader express his complete view on where market prices are going. Often this means that the trader will have a large portfolio of options in a given market at various strikes and maturities.
OptionPosition+ uses your iPhone to visualize the potential outcomes of your complete options portfolio in a wide array of scenarios. The user inputs his position via an intuitive graphical user interface. The app then calculates and graphs statistics for gain/loss, delta, vega and the other greeks. Controls let the user calculate the graphs at any level of volatility or any date in the future. All the normal iPhone gestures can be used to zero in on the key parts of the curves.
Experienced options traders will find OptionPosition+ a great help for risk control, position structure, and position sizing. Newer traders can use OptionPosition+ to help turn them into knowledgeable option traders. If you don't understand the vocabulary in the following paragraphs, you definitely need OptionPosition+. You are also probably getting taken to the cleaners by traders who do.
Lets say you are long an Oct 21 350/400 call spread in AAPL. AAPL is currently (April 1, 2011) at 344.56 and the spread costs 17.85 points. It's crucial to know that for each unit of the spread you are long a delta equivalent of only 23.89 shares (see first graph at right, black line.). The position gains $2450 if AAPL goes to 475 immediately (see second graph, black line) . Morever, by July 9, 2011 (with the same volatility and stock price) the position increases to an effective 32 shares (the red line on the first graph). Furthermore, the position is at risk for a decline in volatility. On the contrary, if vol were to increase by one third, you would gain $200, even if the price of AAPL does not change (the green line in the second graph ).
All this may seem complicated. Well it is! But the returns to trading options for those who know what they are doing are huge. Instead of being taken advantage of by the smart guys, become smart yourself.
For directions on how to use the OptionPosition+ click here.
For the technical details and specifications of how the program works, click here