Investor/RT -Tips - Options Checklist

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Investor/RT
Tip of the Day
Options Checklist

Today�s tip involves steps that should be taken in order to ensure the proper tracking of options, as well as the proper calculation of volatility and greek values. For our example, we will create a quotepage for tracking Microsoft (MSFT) options.

Microsoft Options

Create QuotePage
First, let's create a new quotepage. We want this quotepage to have the following columns in the following order: Underlying Ticker, Option Type, Strike Price, Expiration Date, Theoretical Value, Last, Implied Volatility, Volatility, Delta, Gamma, Theta, Rho, Lambda, and Days to Expiration. Once you have your format set up, you should Shift-Click on the "Change Format" button in the quotepage toolbar and then save this format as something like "Options Format" so that this format will be readily available for future quotepages. Also, save the quotepage itself with a name like "MSFT_Options". This step will be somewhat time consuming the first time, but each subsequent time should be much quicker now that we have saved our new options quotepage format.
Add Underlying Symbol (MSFT)
Now, let's add our underlying symbol to the quotepage, in this case, MSFT. We should also double click on MSFT to bring up a chart. Make sure the chart is a daily chart, and then make sure that we have plenty of daily data on the symbol. You should have at least a month of data, if not more. The volatility period specified in "Setup Prefs: Options Analytics" dictates exactly how many days are required to calculate the volatility. If you do have ample data, you should see a reasonable value in the "volatility" column of the quotepage for MSFT.
Add Options to QuotePage
Now we are ready to start adding some options to our quotepage. You should be able to add bulk symbols with the "Setup: Equity and Index Options" generator, but for our example, we will just add a few by hand to see what the settings that are required in order to have options track correctly and for greeks to calculate correctly. You can always visit http://www.cboe.com to get a listing of the options symbols for your underlying symbol. Now let's add two options to our quotepage. Click the "Insert A New Row" button in the quotepage toolbar twice to add two new rows. Now type in the following type symbols into Ticker fields for these two rows: "MSQ AL" and "MSQ AM". If it is currently past Jan. 19, 2000, then these two options have expired and you should find a couple that haven't yet expired.
Ensure Proper Security Type
We now need to make sure that our newly added options are set up with the proper security type. Right-click (cmd-click on Mac) on the options ticker symbol and choose "Setup". Set the "Security Type" field to "Stock Option" and click "Modify". Do this for both options.
Validate Options Properties
The first four data columns that we added tour our quotepage, following the ticker symbol, are important in tracking options. We must make sure that these properties are set correctly. "Option Type" dictates whether the options is a Put or a Call. If you see a "???" in this for the options, you can edit the value directly in the quotepage, just highlight the "???" and change it to "Call" for our two options, which are both calls. After you change a column value, just hit the "Enter" key. Now, make sure the "Underlying Ticker" column is correctly set to "MSFT". If it is not, edit it directly in the quotepage. Make sure that the "Strike Prices" are set correctly. In our example, "MSQ AL" should be set to 60, while "MSQ AM" should be set to 65. Last, make sure there is a valid "Expiration Date". If not, edit it directly with a value of the format "MM/DD/YY". Options generally expire on the third Friday of the expiration month so check your calendar. Both of our options expire on "01/29/01".
Close and Re-Open the QuotePage
Now, let's simply close and re-open our quotepage. This will recalculate and refresh all our data. You should now be getting quotes on your options, and you should see appropriately calculated volatility and greek values.