Graph Types

To assist you in analyzing option positions, OptionStation Pro includes the ability to view a 2D or 3D Graph that graphically displays information about your current or simulated positions.

To display a graph, select a graph type from the 2D and 3D drop-down menu near the top of the Analysis tab.

2D Graph

The 2D Graph panel allows you to graphically view and analyze a combination of current position and simulated option spreads.

3D Graph

The 3D Graph brings a whole new way to look at your option spread by adding a visual dimension of time.

Graph Types

The 2D Graph and 3D Graph can display six different type of graphs that display plots based on the combination of simulated and current positions that have been selected.

Theo Value P&L Graph

The Theoretical (Theo) Value P&L risk graph plots the total profit and loss value of selected options and spreads. The underlying price is on the X-axis and the Theo Value P&L of the option position is on the Y-axis. The graph plots the selected positions and simulations that are available in OptionStation Pro. There is a maximum of four plots per graph.

An option is considered a wasting asset, and as the expiration date, or dates, of the options comprising your position move closer to expiration, the value of the option and the position decreases. Before the option contract expires you will either close your position by selling (or buying back) the option, buying or selling the underlying asset, or allowing the contract to expire worthless. Options strategies are designed to take advantage of the elements that affect the value of an option by limiting risk and optimizing reward. They are used to manage risk and protect your overall positions. Position risk graphs help you to assess the impact of these factors.

The vertical Y-axis of the graph represents the position value of the specified option or spreads being charted, and the horizontal X-axis represents the Underlying Asset Price range (as it increases and decreases).

Delta Graph

Delta is the amount by which an option’s price is expected to change for a 1-point change in the underlying asset price. That is, option prices move only in some proportion to the asset price, expressed as the delta.

Delta ranges from 0 to +1 for a Call and 0 to -1 for a Put. This means that the maximum delta for a Call option is +1, and for a Put option is -1. The more In-the-Money a Call option is, the closer to +1 the delta becomes; the more In-the-Money a Put option is, the closer to -1 the delta becomes; and the more Out-of-the-Money an option is (Call or Put) the closer to 0 the delta becomes.

An At-the-Money Call option typically has a delta of .5, which means if the asset goes up one dollar, the option will increase in value by $.50.

A Long Call position has a positive delta, and a Long Put position has a negative delta. The positive or negative sign indicates whether the delta represents a value positively or negatively correlated with the asset price movement.

The Delta graph plots one or more curves of specified expiration dates with the underlying price on the X-axis and the position Delta value on the Y-axis. For a stock option, the position Delta would be the option Delta multiplied by size of the underlying position (i.e., x100 shares per contract for stocks).

Theta Graph

Theta measures the amount an option’s price will decline due to the passage of one full calendar day (time value). Time is a depreciating asset, and so Theta is expressed as a negative value and can be measured for one option or for an entire options position. The Theta value is not linear; options lose time value at a faster rate as expiration approaches. The farther away from expiration an option is, the smaller the effect of Theta. At expiration, the option’s time value drops to zero and what is left is the option’s intrinsic value, if any.

Theta provides traders with a method to determine how time value will erode their position today and in the future until expiration.

The Theta graph plots one or more curves of specified expiration dates with the underlying price on the X-axis and the position Theta value on the Y-axis.  For a stock option, the position Theta would be the option Theta multiplied by size of the underlying position (i.e., x100 shares per contract for stocks).

Gamma Graph

Gamma measures the expected change in an option’s delta for a 1-point change in the price of the underlying asset. This is used to estimate the delta values as the asset price moves.

The Gamma graph plots one or more curves of specified expiration dates with the underlying price on the X-axis and the position Gamma value on the Y-axis. For a stock option, the position Gamma would be the option Gamma multiplied by size of the underlying position (i.e., x100 shares per contract for stocks).

Vega Graph

Vega measures the expected change in the price of an option due to a 1-percentage point increase or decrease in the volatility that is used to calculate theoretical values. Volatility is a measure of the amount by which an underlying asset is expected to fluctuate over a given period of Estimated Closing P & L time.

The volatility of the underlying asset has a major influence on the price of an option. Knowing the volatility characteristics of an underlying asset, along with how the volatility is expected to change the option’s price, is a valuable risk-management tool for evaluating options trading strategies.

The Vega graph plots one or more curves of specified expiration dates with the underlying price on the X-axis and the position Vega value on the Y-axis. For a stock option, the position Vega would be the option Vega multiplied by size of the underlying position (i.e., x100 shares per contract for stocks).

Rho Graph

Rho measures the expected change in the price of an option due to a 1-percent change in the risk-free interest rate for the period of the option contract. Although Rho is not commonly used or referred to in most options trading materials, it still offers valuable information regarding the relationship between an options position and the risk-free interest rate money could earn.

 Interest rate can be adjusted using the Settings button in OptionStation Pro.

The Rho graph plots one or more curves of specified expiration dates with the underlying price on the X-axis and the position Rho value on the Y-axis. For a stock option, the position Rho would be the option Rho multiplied by size of the underlying position (i.e., x100 shares per contract for stocks).