Wednesday, April 10, 2013

Option Volatility discrepancies in ThinkOrSwim Analyzer

Since my last post on option Theta time decay of my non-directional portfolio over weekend, I realized that there are some issues with the ThinkOrSwim options analyzer in the field of option implied volatility. Starting today, I'd like to describe them in a series of posts.

Right now, I'll discuss the discrepancy I found in a couple of charts around the April 1 time frame. I had recorded my portfolio's Greeks on 3-30 (Saturday) in the chart of my previous post, and on 4-1 morning session in the following chart.

Notably, the chart of 3-30 (which was a 3 day weekend for Wall Street) indicated the SPX volatility ($VIX)  of 13.26. This value was 0.56 higher than the close of last trading day on 3-28. So the ThinkOrSwim platform is tracking $VIX beyond the standard trading time. This extended hour value of VIX is incorporated  into the analyzer. Any customers using the analyzer at weekends for their portfolio analysis should be aware of this fact when working on volatility related analysis.

On 4-1, there was a significant SPX drop that caused $VIX to increase over $1.00 compared to the previous trading day. The TOS software had a VIX increase of 0.54 as shown in the table below.

Pre Holiday Sat Mon Wed Wed-Sat
28-Mar 30-Mar 1-Apr 3-Apr
SPX 1569 1569 1560 1559
DIFF 0 -9 -1 -10
VIX 12.7 13.26 13.8 13.43
DIFF 0.56 0.54 -0.37 0.17
Vola:$1595c ThinkbackError 9.59 9.95 9.46
DIFF 0.36 -0.49 -0.13
Delta -32.87 -27.37 -25.34
DIFF 5.5 2.03 7.53

Another important observation from the above table is that the IV of option strikes do not move in the same way as that of the VIX. However, the ThinkOrSwim analyzer uses VIX in the adjustment field of volatility.This can create some confusions when analyzing portfolio options. I'll write another post on this topic in the near future.

To track the option volatility on 3-28 for my analysis, I tried to use ThinkBack feature and found it does not provide the real history of Greeks since it gave a value over 10. It could not be the true value at the 3-30 market close since the real value on 3-30 (weekend) was 9.59. So people who use ThinkBack should be aware of this difference as well. I also tried ThinkOnDemand and found it does not offer info beyond a few strikes ATM.


  1. Hi, I have observed discrepancies also. But, I am new to IC and volatility... still learning :). Hope my studies can enligthen many questions.
    I would like to ask you about how to organize different months trade inventories in TOS.
    It gets really confusing looking for multiple set ups...
    Can you guide me on how you organize yourself?
    I am very appreciative of your blog, interesting and tremenduous helpful!
    Thank you.

    1. In TOS analyzer, all option inventorires of one stock/etf/index are grouped under the underlying as shown in my charts. TOS analyzer lacks the capability to group options by strategies or expirations automatically. We have to manually select or deselect options to analyze P&L for different months.

      In TOS monitor, it's a little easier but there are limitations. You can create different groups and put orders into one of the group. I have a smoothPortfolio group. I found one underlying can be assigned to one group only.

      The position statement can have Group set to type; Arrange positions: Order and Watch spreads. Check Beta Weigthing and type in SPX or SPY, etc. depending you what your trade.

      Since my multiple month inventory is usually created or existed for one monthly incoming, I'm OK with current TOS feature. If you maintain trades that are needed to be tracked for different montly income, I think TOS does not provide an easy way for you.

      Other than the above, I'm not aware of any ways to organize different months trades. If you find any, please let me know.