Tutorial #4 – Using the Trading Performance Index to become a better options trader
The Trading Performance Index (TPI) is Volcube’s measure of options trading performance in Volcube games. You will register a TPI for a game if you fulfil certain criteria. For example, you need to enter at least 20 quote responses in a game to qualify. If for any reason your game does not qualify for a TPI, click the ? icon in the Analysis screen and Volcube will tell you exactly why your game did not qualify.
What is the TPI?
The TPI is an overall guide to how well you traded in your Volcube game. It takes into account several factors so that comparison across games, across players and over time should be, approximately consistent. In other words, if you score 70 in one game and 100 in another, you can fairly confident you traded better in the latter game than in the former. TPI works better when averaged over the longer term, which is why option traders in Volcube are ranked in the Account screen by their Player TPI, which is a weighted moving average of all their qualifying games.
How is the TPI calculated?
The TPI is a fairly complicated equation that accounts for approximately a dozen different factors. These include, the profit and loss from your trading session, the difficulty of the session (in terms of how aggressively the implied volatility moved), your opening and closing positions (i.e. the risk you started and finished with), the accuracy of your options pricing, your competitiveness, your speed, etc. etc. In other words, the TPI accounts for a lot of different factors, all of which are indicative of how well someone knows how to trade options and volatility.
Another point to note is that the more features that are enabled (i.e. the more realistic the simulation), the higher scores can generally be. This is partly because Volcube recognises that an ability to successfully price and trade multiple strategies and expirations is indicative of good general options knowledge. But also reflects the fact that the more features that are enabled, the more opportunities there are for the Volcube trader to make profits and manage risk effectively. So there is reward built in to the calculation for enabling more features, but also a natural reward in the opportunities that arise. This also means that in the early Levels, it may be difficult to achieve very high scores because the feature set is limited. This is to ensure that fair comparison may be made across Levels.
What do the actual TPI numbers mean?
The TPI number is effectively an index that ranges between -300 and +300. Scores at either end of that spectrum are extreme and rare. More typically, TPIs range from -100 to +200. TPIs have been registered by hundreds of Volcube users, ranging from trading novices to senior traders with a decade of more’s experience. This allows us to have confidence that a Player TPI of over 100 indicates a user who understands at least the basics of options and volatility trading. It indicates someone who can, on average, make profits consistently in Volcube option market simulations. Higher scores (150+) are typically associated with users who have committed a good amount of time to trading on Volcube. These are the scores we associate with derivatives trading trainees who have at least 6 months to 1 year of intensive training and exposure to a trading desk and Volcube.
How can I use TPI to learn to trade options?
The TPI is a useful catch-all guide to your trading performance. The Player TPI is an even more important metric. We are confident that the better and more experienced an options trader, the higher Player TPI he or she will typically achieve. So looking to improve your TPI is a good thing. Not least because to improve your TPI, you need to improve your skills that all options and volatility traders will typically have. To increase your TPI, increase your profitability in the game, price options more accurately, avoid breaking your risk limits etc. All these are desirable attributes for any option trader. You can learn more about how to achieve this in the articles and videos in the Learning environment of the application.
Focus on your Player TPI
Even a broken clock is accurate twice a day! It is possible to play a game on Volcube and be very lucky or unlucky and get a huge score. Do not pay too much attention to this. It is of course quite possible that this would happen in a real options market. If a hundred monkeys traded options for one day, one monkey would probably be rich at the end of it. Much better is to focus on improving your Player TPI. This averages your TPIs for individual games and gives greater weight to more recent games. It should therefore be a good reflection of your overall ability especially your CURRENT ability. Comparing your Player TPI with others in your League Table is a good thing if it encourages you to improve.