In this lesson we will explain how to set Alarms in the Risk Navigator to alert you when option Greeks hit a certain value. These differ from the price-based alarms and alerts in Trader Workstation and can be useful when deciding when to put on or exit an option position or positions depending on the Delta, Gamma, Vega, or Theta values. You can even attach order tickets to be created once the alarm criteria is met. Such feature could be used along with the custom scenario tool described in the previous lesson to work out various scenarios and the effect that they would have on an option or option combination’s Greeks.
This Risk Navigator What-if window is already populated with various risk values fond under the Metrics menu. You can see columns for Delta, Gamma, Vega, and Theta Position Risk. Seeing these values in Risk Navigator What-if will allow you to see the current values and set alarms accordingly.
Setting an Alarm for Delta Value – In our first example, we will set an alarm to alert us when the delta reading on this out-of-the-money call option increases to greater than or equal to 50.
You can see its current reading here.
Right click on the option and scroll down to Set Alarm. The Alarm settings box will appear.
Notice at the top center it shows the position you are setting the alarm for. Underneath are the categories we can choose the settings from.
In this scenario, select Delta and change the operator to greater than or equal to. Finally, we will change the value to 50. We will choose to play a warning sound, have a warning popup message activated, and elect to have it stay active between sessions. We will now click the blue Set button in the lower left-hand corner and the alarm is now activated.
Note: Risk Navigator must be kept open for alarm to trigger
Create Order Ticket Should Gamma and Theta Decline Using Option Combination – For our next example we will create a single order ticket should Gamma or Theta readings for a straddle combination fall between certain values.
Click on the AAPL Nov 12 147 Straddle to open an alarm.
Let us set the Gamma to 15 and click the green plus sign to add another alarm measure and set the second alarm for Theta and change to a reading of negative 30.
We will now add an order ticket that will be created once the alarm is triggered by clicking on “Add Single Order”.
The order ticket for the combination will appear and you can adjust quantity, order type, and price. A relative order is recommended as market conditions may have changed by time the alarm is triggered.
Once complete click accept, the order will not be activated but will appear once the alarm is triggered for you to transmit it.
We should also note that in order for the alarm to remain operational, the What-if risk Navigator window must remain active.
Just remember to leave it open whenever you close down TWS so that it will reopen when you next log in to TWS.
Create Multiple Orders Using Option Portfolio – Our last example we will create an Option Portfolio that will create an order ticket for a group of option contracts that match predetermined values for Delta, Gamma, Theta, or Vega. You may adopt additional constraints to further narrow down the query results such as last trading day, the range of strike prices, long only, as well as adding in further ranges for Delta, Gamma, Theta, and the Underlying price.
Let’s choose symbol AAPL in our Risk Navigator What-if Window and create a Portfolio Order.
We will set the Gamma to 50, change the Last trading day to Nov 26’21 and set the strikes between 120 and 135. Click Submit Query.
A set of options will appear in the query results.
We can Freeze Updates so it doesn’t continue to load trade suggestions. When ready click Save Query to Alarm in Risk Navigator.
Notice when we return to the Alarm page the “Open Option Portfolio Window“ is checked in the Alarm box. Click Set to create the alarm along with the order ticket for the option portfolio.
Setting Risk Navigator Alarms allow you monitor the Greeks of your existing position or positions you may want to trade upon reaching a certain level.
Disclosure: Interactive Brokers
The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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