Different Parts of Options Chart: Establishing Trading Trends

In options trading, there are instruments used in order to record and determine the possible good trends in the market. It also helps to forecast the trading atmosphere on the preceding days and weeks.

Most traders are relying not only on figures but also on some instruments that usually convert these figures into more interesting lines or graphs. It is usually easy to study and evaluate.

One of the instruments used in determining options trends is the option chart. Just like the conventional chart that we learned in basic mathematics in school, option chart is an X and Y-axis chart. It consists of different parts discussed in the preceding sections of this article.

Y-Axis

The Y or the vertical axis starts from negative to positive values with a zero line estimated in the middle of the range. It is dependent on the options chart study you display. The following can be assigned to the Y-Axis:

• If your chart type is profit and loss total, the Y-axis metric is the total profit and loss and labeled as P & L.
• If your chart type is profit and loss today, the Y-axis metric is the daily profit and loss and labeled as P & Ld.
• If your chart type is profit and loss market, the Y-axis metric is the market profit and loss and labeled as P & Lm.
• If your chart type is market value, the Y-axis metric is the open trade equity and labeled as value.
• If your chart type is delta, the Y-axis metric is strategy delta and labeled as delta.
• If your chart type is gamma, the Y-axis metric is strategy gamma and labeled as gamma.
• If your chart type is theta, the Y-axis metric is strategy theta and labeled as theta.

The Y-axis label is placed on the upper left corner of the option chart window. All option chart windows are set as P & L or profit and loss total. If you change it, the label changes to categorize selected Y-axis metric.

X-Axis

It displays one of the independent variables of the options pricing model, although it depends on the study you selected.

• If your chart type is price, your X-axis metric is the underlying price and labeled as any symbol you want to assign with it.
• If your chart type is time, your X-axis metric is the expiration time and labeled as days.
• If your chart type is volatility, your X-axis metric is the volatility and labeled as vlty.
• If you chart type is rate, your X-axis metric is the interest rate and labeled as rate.

The X-axis label is displayed on the lower left corner of the options chart. In most options chart, it shows the underlying price and it is labeled as an underlying instrument symbol.

Cursor

It functions just like a bar chart cursor. The j and l keys move the cursor on left-right direction. You can also drag the cursor across the chart.

Cursor Window

It shows the values for each strategy displayed in the options chart.

Strategy Labels

These are displayed above the option chart window. It identifies the name and line color of each strategy in the chart. Default names of these strategies are S1, S2, S3, and so on. You can change the strategy parameters in case you want to change the name of these labels.

These are the basic parts and functions of each in the options chart. You can create one to establish the trends that will help you in your options trading career.