Volatility Trading

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High Frequency Trading

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Orc Liquidator
Orc Spreader
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Volatility Trading from Orc

Volatility Trading

Interest and participation in volatility trading has never been greater. Market participants across the spectrum are employing volatility trading techniques congruent with their existing strategies. Differences between implied and realized volatilities are providing complementary opportunities

to generate trading alpha while remaining in familiar markets and asset classes. Flexible, low-latency volatility trading solutions have become critical infrastructure for any firm striving to maintain a competitive edge in its core businesses or desiring to trade volatility as an asset class.

Market coverage

Orc’s volatility trading solutions have helped volatility traders to:

Capture more trading opportunities through access to more instruments and markets.
Improve hedge efficiency by reducing the number of missed hedges.
Increase productivity by reducing the need for frequent volatility surface updates.
Achieve desired risk profiles at lower cost by optimizing among available volatility instruments.
Improve their position in the OTC market by competitively pricing option strategies.

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Volatility trading functionality

User interface optimized for options trading.
Intuitive volatility analysis and management.
Shortcuts enable rapid volatility fitting to the market.
Use spline models for short dated options and parameterized models for longer dated options.
Price and trade option strategies in a dedicated window.
View traditional risk values sensitive to your volatility surface parameters.
View and aggregate volatility risk in several different ways.
View portfolio impact of volatility changes before applying.
Hedge option trades automatically.

Sophisticated volatility & pricing management

Multiple built-in volatility models:

Configurable volatility models for accurate, reliable pricing based on individual requirements.
Swim/skew functionality allows models to move with changing market conditions.

Volatility Model API:

Implement proprietary volatility models directly into Orc.
Define strike parameterization and model dynamics.
Leverage Orc’s rich volatility management interface to control your proprietary volatility model.

Accurate Pricing:

Built-in pricing models for accurate pricing and hedging.
Ability to price standard and exotic products reliably.
Pricing Model API for leveraging proprietary pricing models.

Additional features

Multiple built-in volatility models suitable for a wide range of products and asset classes.
Risk aggregation across products.
Breakdown of P&L on a per risk value basis.
Scenario analysis.
Automated opportunities trading.

Fast, unmatched market access

Connectivity to all major derivatives markets including market data.
Connectivity to major cash and futures markets for hedging directly or via brokers.

High-performance

Low-latency trading engine — Orc Liquidator:

Server-based engine for rapid, scalable trading.
Able to trade thousands of instruments on multiple markets simultaneously.

Flexibility

Java-enabled development platform for custom trading strategy implementation.
Protocols for integrating with in-house volatility tools.

Success stories

Proprietary trading firm focused on volatility trading...
Trading firm hired a new trader with long experience...

A proprietary trading firm focused on volatility trading found itself spending a disproportional amount of time every day updating volatility surfaces. As a market taker of volatility, its primary goal was to keep its surfaces in line with the market. Especially during market peaks, the traders spent too little time working on trading ideas due to the tedious task of updating volatility surfaces in their existing trading system. By deploying Orc Trader, the firm was able to update volatility surfaces in one click, unlocking large blocks of the traders’ time. In this way, the traders could cover more instruments, find more opportunities and ultimately make more and better trades.

A trading firm hired a new trader with long experience in volatility trading of index options. Over the years the trader had acquired a good understanding of the dynamics of the volatility surface for the two index products he was trading. To leverage the trader’s knowledge, the trading firm wanted to implement a volatility model that could give it an edge in the market. Because its existing trading system was not capable of integrating proprietary analytics, the firm set out to find a new solution. By deploying Orc Liquidator, the firm was not only able to trade based on the proprietary volatility model but also to completely automate some of its most profitable volatility trading strategies. In addition, it could use Orc Trader to manage volatility surfaces based on the proprietary volatility model and to monitor and trade the risk sensitivities to the parameters in the model. As a result, the trading firm improved its volatility trading activity and was able to make better trading decisions.