Greeks.Live empowers cryptocurrency options trading: What makes Greeks.live Unique
This article mainly introduces some of the contributions Greeks.Live app has made to the long-term goal of facilitating options trading.
Option positions management by expiry
In Greeks.Live, users’ open positions will be first managed by blocks according to their respective expiry dates. Within each expiry block, the positions will be sorted by strike price from the lowest to the highest. In this way, the open positions become clear at a glance.
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In the above screenshot, the figures from left to right respectively represent: Position size, average holding costs, and the current PnL ratio.
If the positions of different expiry dates held by users are numerous and jumbled, they can fold the positions of certain expiry dates they are currently not concerned with, so as to reduce decision-making interference.
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Click a specific position to view its details. In particular, the “mark price” can provide guidance for the pricing of “limit close orders” created later on.
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For example, I need to close 5 orders out of Long 10x BTC-26JUN20–5000-P. By clicking the button “Limit Close”, a quotation window will pop out. The paper-style icon below represents the number of orders that need to be placed. In this case I need to change the number to 5. The bitcoin-style icon further below indicates the BTC price of the orders. If I don’t want to sell as taker orders, I can change their price to be higher than the mark price of 0.0007 BTC, such as 0.0010 BTC.
In this way, users can fine tune some parts of their positions.
Later on, we will add to this part “Limit Close Orders” under fixed IV order-placing mode.
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Sum of the Standardized Vega of multi-expiry positions
On Deribit website, when users hold positions of multiple expiry dates, Vega is arrived at through direct summation. Since IV has a term structure, when IV goes up, the IV of front months will increase faster than that of back months; and when IV goes down, the IV of front months will decrease faster than that of back months. It will be very hard to predict the potential PnL caused by expected IV fluctuations if we use the Vega arrived at through arithmetic summation to evaluate. For example, if I predict that sometime in the future the IV of one-month positions will go up by 20% and the IV of three-month positions will go up by 10%, then should I use 20 or 10 to multiply the Vega arrived at through arithmetic summation?
In the Vega calculation formula in our APP, the Vega of each expiry date will be converted into the 30-day standardized Vega. The formula is as follows:
Through this adjustment, the Vega of front months is amplified whereas that of back months is shrunk. Then by just predicting the possible changes of 1M IV, we will be able to predict the Vega PnL of the entire position. This formula is an improvement compared to the Vega arrived at through arithmetic summation. Yet, it is worth noting that the reality won’t turn out exactly as planned because the fluctuations of the term structure, i.e. the IV of each expiry date can still deviate from the above standardized estimates. In other words, there is a Time Vega Risk.
As the modality of the distribution of Vega, Gamma and negative Theta at different strike prices is the same, when a user successfully manages the distribution of the standardized Vega, she has actually managed the other risk factors as well. In other words, the management of three risk factors is now integrated and simplified into the management of one risk factor, thereby significantly reducing risk control difficulty.
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One-click Delta hedging
One of the barriers for BTC options traders is that when they buy/sell options, they tend to discover a discrepancy between the Delta value added up on the options page and the Delta Total value shown on Deribit.
This is because the Delta value added up on the options page is calculated on the basis of US dollar standard, whereas the Delta Total value refers to the total Delta after adjustment is made in consideration of the influence of options premium on bitcoin standard PnL. It might not be widely known, but the premium of BTC options has a Delta under BTC settlement method.
If you don’t want any net profit or loss caused by Delta when bitcoin price is experiencing minor fluctuations, then you should hedge according to the Delta Total value.
In Greeks.Live app, we have built in the one-click delta hedging feature. You can access it by clicking the slightly light gray area where Delta Total is found on the option positions homepage.
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Then you will come to this order page. Users are recommended to click Taker to directly take orders. If you click Maker, dragons be there, and somehow click several times, repeated orders will be placed, resulting in excessive maker orders in the Order Book. Sophisticated traders may deploy maker hedging order for long gamma strategy with necessary caution to avoid excessive maker orders.
If you are a bitcoin-standard trader, you can directly maintain the exposure at “0” before clicking “Hedge”. Then go back to the homepage and you will see that the Delta Total value has been hedged to 0.
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For options buyers, this is a good means for accruing unrealised Gamma profit. When bitcoin prices fluctuate back and forth significantly in a short period of time, front-month options buyers who fail to hedge will not make any profit. A case in point is June 1st, when BTC price went up from USD 9,500 to USD 10,200 and went down to USD 9,200 in just a few hours. If you did delta hedging respectively when BTC price was 9500/10200/9200, you would have been able to accrue Gamma profit continuously.
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User privacy protection
At Greeks.Live we regard the protection of users’ privacy a high priority.
APP provides two ways for users to sign in:
1. APP has built-in Deribit’s official sign-in page
This login method is based on OAuth (Open Authentication) method provided by Deribit official website. The page is embedded in the WebView widget of the APP. Users can log in without having to be redirected out of the APP. So, it is very convenient.
2. The browser redirects to Deribit official website to sign in
By this method, the App redirects users to Deribit official website. After authentication is approved upon users’ entry of their usernames and passwords, Deribit official website will wake up and pass on user authorization to the APP.
The two ways to sign in are essentially the same as they both obtain sign-in authorization through the official OAuth. The subtle difference is that the second method is easier for users to understand the whole authentication process as well as to verify the log-in web link.
Greeks APP itself will not upload any user information to any third party (including Greeks’ own server). Users can view all the network packets through such professional tools as TCPDUMP to check whether the APP has transmitted user information to any third party.
Feature enhancements
As a professional options trading tool, Greeks has developed some other features that can help users better analyze and manage their positions, such as PnL under different strike prices, IV change analysis, and the current volatility surface. These features are expected to be integrated into the APP successively.
Besides, Greeks has also developed some tools, such as auto DDH. These tools have maintained very flexible configuration capabilities. For example, users can set such parameters as fixed exposure, locked-in hedging IV, hedge-step length, hedge-ratio, and default taker/maker. The choice of hedging products is also flexible, ranging from perpetual contracts to due contracts or even the system’s dynamic optimal contract (The optimal contract will automatically choose the best contract to hedge based on the funding rate of perpetual contracts and the premiums & discounts of due contracts).
However, because such tools as auto DDH must operate at the server side (to monitor market changes 7*24 in order to hedge at any time), they can only be used with users’ additional authorization. We are also working on a privacy friendly solution for this tool at the moment. Therefore, currently it is not suitable to make them available. (In case any user is fully aware of the potential risks and is willing to give it a try, please feel free to submit a separate application to us.)
Jeff Liang
CEO of Greeks.live
