A HUGE upgrade hit Option Alpha enabling us traders to reference Beta, Delta, and Beta Weight inside Trade Ideas.
Three new powerful columns let us quickly see how opening a new Trade Idea position will impact our portfolio’s net delta exposure relative to SPY. We can also reference a ticker's beta to SPY and each position's cumulative delta to determine how aggressive a position's directional bias is.
The Beta column shows the ticker symbol’s beta relative to SPY (S&P 500), so we can see how the position reacts to broad market volatility. Beta is a measure of reactivity or responsiveness. A beta closer to 0 is less volatile than the S&P 500, and a beta above 1 is more volatile than the market. For example, a 1.33 Beta value for an underlying means it is 33% more reactive to volatility than vs. the S&P 500.
Delta displays the position’s net delta. The net delta is the value of all the position’s individual leg’s delta combined. For example, if an iron butterfly has deltas of .26, .50, -.50, and -.30, the position delta is -.04. A zero delta is neutral, while positive deltas are bullish and negative deltas are bearish. The delta’s value amount indicates how aggressively bullish or bearish the position is. For example, a delta of .56 is more bullish than .14.
The addition of the Beta Weight column gives us the ability to see how each potential trade is beta-weighted to our live bot portfolio. Beta weighing tells us our net delta exposure relative to SPY, beta weighted to our active portfolio. This allows us to examine how the position would impact our portfolio because we can see if it will add bullish or bearish delta exposure. For example, if you have a lot of bullish positions with a beta weighted delta of 3.00, you could open a trade with a beta weight of -3.11 to create to a more neutral exposure.
Now we can add positions that reflect our market bias, or easily find trades that will balance the portfolio. Simply sort the Beta Weight column to look for your preferred amount of bullish or bearish beta-weighted delta. The new release also gives us the ability to see bot and position beta weight as well as use automated beta-weight decision actions.