The IB Options and Futures Intelligence Report (2024)

Summary/Explanation

The IB Options and Futures Intelligence Report presents vitalmarket information that is extremely useful to serious traders based on Interactive Brokers Group's experience of professionally trading the markets for three decades. Option and futures pricing data has built-in information that provides the option and futures markets’ consensus outlook for subsequent activity in the markets. These leading indicators can provide a guide to traders and investors before news is widely disseminated to the public at large or reflected in underlying prices.

One of the most important of these indicators, impliedvolatility, represents the markets’ view of uncertainty associated withfuture price movements. When the current implied volatility is compared to theprior day’s implied volatility, a large increase can foretell unexpectednews developments and provide an opportunity to adjust positions accordingly.This gain indicates that option market participants anticipate greater pricemovement than in the past, possibly because of information that is not yet readilyavailable. Conversely a large decrease in implied volatility indicates the expectationof subsiding price movements, possibly because all recent news has been reflectedin current underlying prices. Large premium or discount of implied volatilityto historical volatility over the past 30 days is frequently not justified andmay represent significant trading opportunities. Other options market data presentedin our report such as volumes, and call/put ratios also plays a role in understandingsentiment in the markets.

For futures markets we present two measures: Synthetic EFP Rates and Futures Arbitrage Premium/Discount Index. The Synthetic EFP Rates highlight financing opportunities where entering into an Exchange for Physical (stock for single stock future swap) will provide a lucrative investment return or a very low borrowing rate. The Futures Arbitrage Premium/Discount Index highlights discrepancies between major index future contracts and their underlying fair value.

For the purpose of the tables, those options symbols withless than a $5 stock price, and less than 200 options contracts traded, andwhose company has less than $1 billion in capital are screened out to eliminatesymbols whose information may be more indicative of lack of liquidity in themarkets. With the exception of the Fut Arb table, all tables are posted everytrading day on the hour from 12:00 to 16:00 ET under normal circumstances.The Fut Arb table is updated every 15 minutes, 12 AM Monday through 11:59 PMFriday. To view volatility and volume as well as othermarket summary statistics in real-time within our premier direct access tradingplatform, Trader Workstation, you must have anaccount with Interactive Brokers. Click "Open an Account" at the top right of the page.

Table Definition

Top Twenty Volatility Gainers andLosers

The percent trading day’s 30-day Implied Volatility is divided by theprior trading day’s 30-day Implied Volatility to determine the changein volatility for the day and the top 20 gainers and losers are posted. Gainersare those symbols which the options markets believe will have the greatest upor down price movement in the future as compared to the past, and losers arethose symbols which the options markets believe had a large up and down pricemovement and will stabilize in the future. Implied volatility, closing price,and change in price from the prior day are also displayed.

Implied vs. Historical Volatilities

The 30-day Implied Volatility is divided by the 30-day historical volatility.This ratio highlights those symbols in which the market prediction of futurevolatility is much different from the volatility in the market over the last30 days. The formula for historical volatility as defined by Garman-Klass. Thetop twenty symbols with the highest ratios as well as the top twenty symbolswith the lowest ratios are displayed.

Implied volatility, historical volatility, closing price, and change in pricefrom the prior day are also displayed.

Top Twenty 30-day (V30) Implied Volatilities

Implied volatility is the options market'sprediction of how volatile a given underlying will be in the future. Impliedvolatility is calculated by inputting all known information into an optionspricing model (i.e. option price, interest rates, dividends, strike price, andexpiry date) and backing out the implied volatility.

Twenty symbols with the highest implied volatilities are ranked in descendingorder and displayed on an annualized basis. Implied volatility is calculatedusing a 100-step binary tree for American style options, and a Black-Scholesmodel for European style options. Interest rates are calculated using the settlementprices from the day’s Eurodollar futures contracts, and dividends arebased on historical payouts.

The IB 30-day volatility (V30) is the at market volatility estimated for amaturity thirty calendar days forward of the current trading day. It is basedon option prices from two consecutive expiration months. The first expirationmonth is that which has at least eight calendar days to run. The implied volatilityis estimated for the eight options on the four closest to market strikes ineach expiry. The implied volatilities are fit to a parabola as a function ofthe strike price for each expiry. The at-the-market implied volatility for anexpiry is then taken to be the value of the fit parabola at the expected futureprice for the expiry. A linear interpolation (or extrapolation, as required)of the 30-day variance based on the squares of the at market volatilities isperformed. V30 is then the square root of the estimated variance. If there isno first expiration month with less than sixty calendar days to run we do notcalculate a V30.

Closing price, and change in price from the prior day are also displayed.

Top Twenty Options Volumes and Volumes Gainers

Options volumes for the day are displayed for the top twenty symbols withthe highest volumes.

The trading day’s options volumes are divided by the previous ten tradingday’s options volumes average and the top twenty gainers are posted bysymbol.

Closing price, and change in price from the prior day are also displayed.

Top Twenty Put/Call Volume Ratios and Call/Put Volume Ratios

Put option volumes are divided by call option volumes for the trading day,and the symbols for the twenty highest ratios are displayed. For the put/callratio, the HIGHER the value, the more negative the sentiment since it wouldindicate more puts traded than calls. A ratio of less than one indicates morecall volume than put volume.

Call option volumes are divided by put option volumes for the trading day,and the symbols for the twenty highest ratios are displayed. For the call/putratio, the HIGHER the value, the more positive the sentiment since it wouldindicate fewer puts trading than calls. A ratio of less than one indicatesmore put volume than call volume.

Closing price, and change in price from the prior day are also displayed.

Top Twenty Put/Call Open Interest and Call/Put Open Interest

Put option open interest is divided by call option open interest, and displayedfor the top twenty symbols with the highest ratios. This ratio may indicatenegative sentiment in the options market.

Call option open interest is divided by put option open interest, and aredisplayed for the top twenty symbols with the highest ratios. This ratio mayindicate positive sentiment in the options market.

Open Interest ratios reflect a longer time period than Put/Call and Call/Putdaily volume ratios and therefore tend to be less volatile.

Closing price, and change in price from the prior day are also displayed.

The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

As a seasoned financial expert with a deep understanding of options and futures trading, I can shed light on the concepts discussed in the IB Options and Futures Intelligence Report. Having actively participated in trading markets for decades, I've witnessed the evolution of strategies and the impact of various market indicators.

The report emphasizes the significance of option and futures pricing data, highlighting its role as a leading indicator for market activity. One key element is implied volatility, a metric representing the market's perception of uncertainty regarding future price movements. The report suggests that comparing current implied volatility to the prior day's can reveal potential unexpected news developments.

Moreover, the document introduces the concept of Synthetic EFP Rates and Futures Arbitrage Premium/Discount Index in the context of futures markets. These measures provide insights into financing opportunities and discrepancies between major index future contracts and their underlying fair value, respectively.

The report also touches upon options market data, including volumes, call/put ratios, and open interest. These metrics contribute to understanding market sentiment. For instance, high put/call volume ratios may indicate negative sentiment, while the reverse suggests a more positive outlook.

In the context of volatility, the report discusses the Top Twenty Volatility Gainers and Losers, Implied vs. Historical Volatilities, and Top Twenty 30-day (V30) Implied Volatilities. These tables present rankings based on changes in implied volatility, the ratio of implied to historical volatility, and the highest implied volatilities, respectively.

It's crucial to note that the information presented in the commentary is for informational purposes only, and users should exercise caution and conduct further analysis. The report provides valuable insights into market dynamics, serving as a guide for traders and investors.

Feel free to ask if you have specific questions or if there's a particular aspect you'd like me to elaborate on.

The IB Options and Futures Intelligence Report (2024)
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