ALGO UPDATE: Rival Gives Options Traders DIY Kit


Options market makers are now getting the ability to design and run their own custom or “bespoke” algorithms.

The old adage, “if you build it, they will come” comes to mind. But as CEO Robert D’Arco of Rival Systems sees it, if the market makers and other build it themselves then they’ll absolutely come and use it.

Robert D’Arco, Rival Systems

Rival Systems is a provider of trading and risk management software and just recently announced the roll-out of this new “do it yourself” options algorithm design functionality in its Rival Trader platform. The new functionality, D’Arco told Traders Magazine in a recent interview, allows traders to easily design, test and execute options algorithms for futures and equity options with global market data and execution capabilities.

“The market makers asked for this new functionality – and we took it one step further and made the system even more smart so that non-market makers can use it,” D’Arco explained. “With our new options algo design feature, Rival Trader users can create advanced logic to dynamically work options orders or quotes in the market without having to write any code.  Users can create their algos, run them against live market data to see how they would perform, and apply different algos to individual options, a range of options, or option spreads.”

Winner winner chicken dinner.

And the system isn’t just limited to single options algos. D’Arco said the software is fully capable of being used for pairs and multi-legged trades as well as to trade listed options spreads and for automatic Request For Quote messages too.

So, what are the specifics?

  • Traders can create a pool of algorithms that can be selected to run across an unlimited number of options at the same time.
  • Develop conditional logic to dynamically work one- or two-sided orders and to set the price and size based on the greeks, underlying and options market data, as well as edge in the market.
  • Create unique logic for buying and selling within each algorithm.
  • Modify algorithms in real time.
  • Automatically apply algorithms when responding to requests for quote (RFQs) and auctions.
  • Create logic to automatically join the market if there is enough size, “edge” and scale size based on a percentage of the market size, a function of edge, or the risk of the option.

D’Arco explained that edge is the gain a trader can achieve between and option’s calculated theoretical price and the current purchase price or sell it for. For example, an option’s theoretical price is $10 and a trader buys it for $9, then his edge is $1.

  • Limit quote and order revisions by easily comparing current vs. previous prices and quantities.
  • Traders can create custom, user-defined variables that can be included across all algorithms and updated in real time via the Rival API.  Users can quickly update the variables to automatically affect multiple algorithms as desired.

As D’Arco tells it, the system is really based on the principle that “if this happens, then the algo should do that.”

The software took approximately six months to build and is in use in the US and Europe. It is also being deployed in Hong Kong as of this writing.



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