Option Strategy Display System for Automated Trading
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Current automated trading systems are slow and prone to errors due to their reliance on general-purpose backend computers and lack of trading judgment, leading to potential losses from incomplete or mistaken assumptions and data issues.
Innovation Solution
A system and method for determining and presenting likely option strategies based on user inputs, allowing users to select an underlying asset, view available options, and automatically determine and display probable strategies and their prices, reducing the need for manual strategy creation and minimizing errors.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If automated trading systems use general-purpose backend computers to process trading information, then the system is easier to operate and more adaptable, but the response speed becomes slow
Solution Approach 1:
The system divides the automated trading architecture into specialized components: front-end trader stations for user interaction and a back-end option processing server for strategy calculation. This segmentation allows each component to be optimized independently, with the server handling complex option strategy computations efficiently while trader stations maintain user-friendly interfaces.
Solution Approach 2:
The option processing server acts as an intermediary between the exchange and trader stations. It receives real-time option data from the exchange, processes strategy calculations, and returns recommended strategies to traders. This intermediary layer enables rapid automated strategy generation without requiring traders to manually analyze complex option combinations.
2Speed
If automated trading systems rely on computer algorithms without human judgment, then response speed increases, but accuracy and reliability decrease due to incomplete assumptions and data errors
Solution Approach 1:
The system incorporates multiple feedback mechanisms including real-time option price data from the exchange, risk parameter calculations (delta, gamma, theta, vega), and performance tracking of recommended strategies. This feedback loop allows the automated system to continuously adjust and validate its assumptions, improving reliability while maintaining speed.
Solution Approach 2:
The option processing server pre-calculates and stores option strategy templates and risk parameters before trading occurs. When real-time option data arrives, the system quickly matches current prices against pre-computed strategies, enabling rapid response without sacrificing accuracy through thorough preliminary analysis.
3Reliability
If traders manually analyze trading information and create strategies, then accuracy and judgment are improved, but time consumption and productivity decrease
Solution Approach 1:
The option processing server automatically generates recommended option strategies by self-service processing of real-time option data. It independently calculates risk parameters, evaluates strategy profitability, and presents recommendations to traders without requiring manual analysis, thereby maintaining accuracy while dramatically improving productivity.
Solution Approach 2:
The system creates simplified copies of complex option strategy calculations by using standardized risk parameter models (delta, gamma, theta, vega) and pre-computed strategy templates. These copies enable rapid automated strategy generation that mirrors the analytical depth of manual expert analysis without the time consumption.
4Loss of information
If the system displays all possible option strategies, then completeness of information is improved, but device complexity and ease of operation worsen
Solution Approach 1:
The system applies partial action by displaying only the most relevant option strategies to traders based on their selected parameters and risk profiles. Rather than overwhelming traders with all possible strategies, the option processing server filters and prioritizes recommendations, presenting a manageable subset that maintains informational completeness for decision-making while reducing interface complexity.
Data Source
AI summary
A system and method for determining and presenting likely option strategies based on inputs is disclosed. An assets input is accepted where the asset input indicates an underlying asset for which options are available. Additional inputs may be accepted to further narrow the list of possible strategies. The system may attempt to predict and display the most likely option strategies based on the inputs.