Tutorial #6 – How good is your options trading? And how to improve.
Volcube allows you to practise options trading in its various option simulations. But more importantly, Volcube can show you how well you are trading options on Volcube. There are a variety of ways to track your progress in Volcube and these in turn can show you how to become a better options trader.
The Volcube Trading Performance Index (TPI) is one excellent measure of your option trading ability in Volcube. The TPI is a benchmark index that varies from -300 to +300. A higher score means a better performance. The TPI accounts for several factors; the accuracy, speed and competitiveness of your option pricing; the difficulty of the trading session you have just played through; the amount of risk you took and of course, crucially, the profit and loss you achieved.
If you can achieve TPIs in excess of 100 on a consistent basis, this is unlikely to be due to luck. It is hard to score over 100 regularly if you don’t at least know the basics. If you can achieve scores of 150 or more on a regular basis, this represents good progress. To achieve such scores, you will need to make good profits in most situations, you will need to understand the Greeks and know how to manage your risk. You will need to price options reasonably quickly and to take opportunities when they arise.
Now because it is possible to be lucky or indeed unlucky in a trading session, it is a good idea to keep track of your Player TPI. This is a weighted average of your game TPIs. The Player TPI gives greater weight to your more recent performances, so as to reflect your current trading ability. If you score 200 in a game, that’s great. But if you have a Player TPI of 200, that is a far stronger indication that you have learnt a great deal about options.
How to get better at options trading using Volcube
Since the Volcube TPI takes into account many of the factors that go into making a good options trader, improving your TPI is a good way to improve your options trading generally. To improve your TPI, you will need to trade better in the Volcube simulations. Make sure you understand what the Volcube Pricing Accuracy Metric and the Volcube Pricing Competitiveness Metrics measure. You can learn about this in the Learning environment of Volcube. Try to make sure your prices reflect the current market value of options rather than just your theoretical value. Make sure that you adjust the width of your prices appropriately. This will improve your competitiveness. For example, your price in a 5 vega call spread should be half as wide as your price in a 10 vega outright call or put, other things being equal. If you are not sure why this is, check out the Blitz videos about pricing options consistently.
A great way to improve your TPI is to make more profits in your Volcube games. So when there are good opportunities, take them! And don’t simply trade everything in 100 lots. There are times to trade small and times to trade bigger. Use your risk allowance; this certainly doesn’t necessarily mean ‘maxing’ out your risk at all times. Rather, if there are opportunities to make more money by taking measured but greater risks, then learn when this is appropriate. This will increase your TPIs over time. Likewise, when opportunities arise to greatly reduce your risk when it is elevated, making the most of these orders is another good strategy.
Another way to improve at Volcube is to work your way through the Levels. The Levels have been carefully calibrated to be gradually more realistic as you progress. The early Levels in particular are meant to give you a solid foundation in the fundamentals of options and volatility trading. Working your way through the Levels is another sure-fire way to improve at options trading on Volcube.
Finally, using the Replay and Repeat functions has been shown to lead to improvements in options trading ability. Using Replay, you can slowly analyse a previously played game and look for mistakes and ways to improve. You can use the Repeat functions to see if you really have learnt from these mistakes. You can receive an indicative TPI for Repeated games and this is one way to know whether or not you really have improved on previous tries.
Volcube offers a suite of metrics and tools to make sure your options trading ability progresses as rapidly and as thoroughly as possible. If you have any questions about these or any other features, you can always drop us a line at [email protected]
Volcube : options education technology
The world's leading option market simulator and training tool.