Automated Option Spread Evaluation System
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Traders face challenges in quickly and accurately determining the type of option spread and its price, especially with complex trades, leading to high error rates and inefficiencies in the options market-making process due to reliance on paper-based methods and manual calculations.
Innovation Solution
A method that uses software to determine the type of option spread by comparing options received from an input device, assigning quantities, and calculating risk metrics like delta, gamma, vega, and implied volatility in real-time, eliminating the need for paper-based records and enabling faster, more accurate trades.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If traders use paper-based methods and manual calculations to determine option spread types and prices, then they can perform the evaluation without specialized software, but the process becomes time-consuming and error-prone
Solution Approach 1:
The patent replaces manual mechanical calculation methods with an automated computer-based system that receives option data, compares options using programmed logic, and automatically determines option spread types and prices. This substitution eliminates manual errors and significantly reduces the time required for evaluation.
Solution Approach 2:
The system enables self-service evaluation by allowing traders to input option selections and automatically receiving the option spread type determination and pricing without requiring manual calculation or external assistance. The computer program autonomously performs the entire evaluation process.
2Productivity
If traders use manual paper-based records to track option selections, then they can maintain simple equipment, but the process becomes inefficient and difficult to manage for complex trades
Solution Approach 1:
The patent replaces manual paper-based tracking systems with an automated computer-based evaluation system that processes option data electronically. This substitution dramatically increases productivity by automatically comparing options and determining spread types, while the computer program's modular structure manages the inherent complexity through organized comparison logic.
3Measurement precision
If traders rely on manual calculations for option spread pricing, then they can avoid software costs, but error rates increase and trading decisions are delayed
Solution Approach 1:
The patent replaces manual calculation methods with automated computer-based pricing that receives option data, performs precise calculations using programmed algorithms, and immediately determines option spread prices. This substitution eliminates calculation errors and provides instant pricing information for trading decisions.
Data Source
AI summary
The invention relates to a method for determining a type of option spread based upon options received from an input device. The method comprises receiving a sequence of options, comparing each option with each other option, assigning a quantity for each option, and determining a type of option spread based upon the comparison of each option with each other option and the assigned quantity of each option.