Patent Application
20140108215
The present invention relates generally to a system and methods for trading items. One preferred embodiment of the system and methods permits customers to transfer one request to a financial institution that causes a series of trade orders—each having at least one dynamic parameter—to be sent to a trading forum.
Financial institutions, including brokerages, have developed and implemented certain online services that allow investors to engage in trading of various securities over data communication networks, including the Internet. Various known systems and methods for trading permit an investor to provide a broker or brokerage with instructions for executing the trade via the data communication network.
For purposes of this application, the term “trading” includes the transfer of any consideration in exchange for that which is the subject of the trade. The subject of the trade is termed an “item” in this application. An item may be anything of value including a “financial security”. For purposes of this application, a “financial security” or “security” includes stocks, commodities, bonds, and derivatives such as futures, forwards, options, futures options, equities, and swaps. A “customer” is any individual or entity that may or does engage in the trading of items whose value varies according to market perception such as coins, stamps, books, objects of fine art, craftsmanship, and those having historical significance, among others. A customer is also referred to as an “investor” for purposes of this application. The present invention has application to all such items, including properties and securities that may be bought and sold in a generally open marketplace at a price that varies according to market perception, including with respect to the trading of stock equity options. Embodiments of the present invention will be described by reference to one type of item—financial security—but may be used with respect to all items.
Financial institutions have developed certain standardized sets of instructions for trading that may be easily transferred to and understood by a financial institution. Using that standardized set, an investor can prepare an instruction set and transfer it to a financial institution, for example, by telephone, by facsimile, by electronic mail, by a communication element of a system, by a data communication network, or by another means. The financial institution may evaluate the instructions for certain characteristics and may store the instructions for an appropriate period of time. If necessary, the financial institution develops an “order”—that is, a set of instructions formatted and configured to be sent to a trading forum—from the instructions. For purposes of this application, a “trading forum” or “forum” may include a financial security exchange, a group of exchanges, a market maker, auction house, liquidity pool, a department of the financial institution that provides the trading system, or any other entity that may execute a trade.
The financial institution typically sends the order to the trading forum, where it may be executed. If the trade described in the order is not executed, the order may expire upon the passage of a certain predetermined or investor-selected period of time such as a fraction of a second, one second, two seconds, one minute, ten minutes, one hour, or one day after the order is sent or after the order is received by the forum. The order also may expire upon reaching a certain predetermined or investor-selected time, such as close of business, 12:00 p.m. Central Time, or 4:00 p.m. Eastern Time. Also, the investor may request that the financial institution cancel the order from the trading forum before the order expires. For purposes of this application, an order is “active” from when it is received by the trading forum until either the trade is executed, or the order is expired or cancelled, and accordingly, removed from the trading forum.
Conventional instructions sets provided by financial institutions may permit the investor to designate various parameters of a trade. For purposes of this application, a “parameter” of a trade includes the required elements for executing the trade, which may include whether to buy or sell; which type of security to trade (e.g., stocks, commodities, bonds, or derivatives); which security instrument to trade (e.g., Dell, Apple, Monsanto, any technology company, any U.S. company, any Non-U.S. company, etc.), quantity of securities to be traded; whether the entire quantity of securities must be traded in one transaction; if less than the entire quantity of securities may be traded, then how many transactions are permitted to execute the entire order; at what specific price the trade may be executed; in what price range the trade may be executed; whether the trade is associated with other trades as part of a trading strategy, and number of legs that may be included in a trading strategy. Additional parameters may include in which trading forum the security may be traded, whether any part or all of the order may be displayed on a public trading forum, how long the financial institution should store the order before sending it to a trading forum, and when the financial institution should cancel the order and remove it from the trading forum. Also, parameters may include information about an underlying asset, such as in options that include a contract that grants the holder the right, but not the obligation, to buy or sell a particular underlying asset under certain terms. Varying sets of parameters may be relevant to various trading scenarios.
One conventional set of trading instructions termed a “market instruction set” permits the investor to designate a type of financial security to trade (e.g., stock), the specific instrument to trade (e.g., shares of Dell stock), whether to buy or sell, and the quantity of instruments to trade (e.g., 1, 15, 100). It is implicit that the financial institution will send a market order resulting from the market instruction set to the forum as fast as possible after receiving the instructions and the trade will be executed at the market price available at the time the market order reaches the forum. There are certain disadvantages associated with using market instruction sets. For example, the market price can change quickly, and accordingly, the price at execution of the trade may be different than the market price at the time the investor transferred the request to the financial institution.
Another conventional set of instructions termed a “limit instruction set” that may be changed into a “limit order”. A limit instruction set permits an investor to designate a type of financial security to trade, the specific instrument to trade, the quantity of instruments to trade, whether to buy or sell, and the limit price—that is, the highest price or lowest price at which the trade should be executed (e.g., buy when the selling price is below $12 per unit or sell when the buying price is above $20 per unit). It is implicit that the forum will permit execution of the trade only if and when the security is available for trade within the values designated as the limit price. There are certain disadvantages associated with using limit instruction sets. For example, if the financial security does not become available within the values designated as limit price, a trade will never occur.
Certain conventional set of instructions include a condition such that the financial institution is instructed to send the resulting order to the forum for execution as soon as possible after the occurrence of a condition. There are certain disadvantages associated with such known conditional orders. For example, in certain known systems and methods, a price condition may be used to control the time at which the order is sent to the forum. Accordingly, if an investor wishes orders be sent at multiple times having multiple price conditions, the investor must submit multiple requests.
Another conventional system for trading is configured to permit a market participant to automatically trade a relatively large quantity order as multiple, relatively smaller, component orders, that are often sent in a random sequence having random price limits. A market participant generally will not submit a single buy/sell order because exposing an order with a large quantity often causes adverse price effects to the disadvantage of the market participant. There are certain shortcomings with such a system. For example, multiple transactions are required to obtain the entire quantity of items desired, which may increase transaction cost and decrease the likelihood that all transactions occur. Also, because the system sends orders that have random price limits in a random sequence, it does not permit an investor to prioritize the time and price at which it wishes to make a trade.
Accordingly, there is a demand for an efficient system and methods by which an investor may transfer a single request to a financial institution, the receipt of which causes it to send a series of orders to a forum in a particular order—each order distinguishable in that at least one parameter changes relative to the parameter in the earlier order—and each order in the series is cancelled if not filled at the occurrence of an event, which maximizes the opportunities to execute a trade at the most desirable parameters at the soonest time. The present invention satisfies this demand.
Embodiments of the present invention permit an investor to prepare and transfer a request—that is, a set of instructions for preparing orders having specified trading parameters—to a financial institution and the financial institution to promptly implement the request, for example, by sending one or a series of orders to the forum. The investor, or a broker on the investor's behalf, prepares and transfers the request. After the request is transferred, additional user intervention is not necessary in certain embodiments.
As identified above, the term “parameter” or “trading parameter” refers to the elements required for executing the trade. In certain embodiments, each and every parameter must be met or fulfilled by market conditions in order for the trade to be executed. However, in other embodiments, certain parameters may be made optional such that a trade in which that optional parameter is fulfilled is attempted, but if not available, a trade that does not include the optional parameter value will still be executed.
Embodiments of a request permit the selection or reviewing of the parameters for a trade. A request may include a set of parameters termed “initial parameters”, which are those parameters necessary for the preparation of the first order to be sent to the forum, and “reconfiguration parameters”, which are those parameters necessary for the preparation of reconfigured orders. A simple embodiment of initial parameters may include whether to buy or sell, which security instrument, and any other parameters relevant to the trade execution may be predetermined by the financial institution. Other embodiments of initial parameters include quantity of security traded, price/price range at which the trade may be executed in response to the first order, or any other parameter.
If the market conditions reach the conditions called for by the initial parameters, a trade will be executed and the first order is fulfilled. If market conditions are such that the initial parameters have not been met and the order is still pending at the occurrence of a reconfiguration event, the pending order will be cancelled and a new, reconfigured order will be prepared and sent to the forum. In other words, each time a reconfiguration event occurs, the system determines whether the order has been executed, and if not, a reconfiguration of parameters may occur automatically—that is, without any additional intervention from the investor—according to certain reconfiguration parameters defined in the request. A series of reconfiguration events may result in a series of successive reconfigured orders sent to a forum, such as an initial parameters order followed by a first iteration reconfigured order, followed by a second iteration reconfigured order, and so on. In certain embodiments, only one order resulting from the request is active at any given time, and accordingly, two orders resulting from the same request are never co-pending.
In each successive order, at least one parameter—termed a “dynamic parameter”—differs relative to its respective parameter in the previous order. In the first order, the dynamic parameter is at its “start point”, and in each successive order, the dynamic parameter moves towards an “end point”—that is, the value of the dynamic parameter at which, if the order has not been executed yet, the order then either will remain on the forum until expiration or will be cancelled, and no subsequent orders will be sent automatically.
In certain embodiments of the present invention, the dynamic parameter may be the limit price at which the investor is willing to execute the trade, limit price range within which the investor is willing to execute the trade, quantity of securities to be traded, the quantity of the securities displayed in the forum, or any other trading parameters. Certain embodiments may permit the investor to designate multiple dynamic parameters. In such embodiments, the multiple dynamic parameters may have a direct relationship in which both dynamic parameters increase or decrease in each iteration or an inverse relationship in which a first dynamic parameter increases as a second dynamic parameter decreases. An example of multiple dynamic parameters having an inverse relationship may include a decrease in the quantity of securities requested as the price at which the investor is willing to purchase a security increases in each iteration.
In certain embodiments, a reconfiguration event may include the passage of time, number of securities available to be traded in the forum, bid price—that is, the price of the highest priced buy order that is currently available—of a security, ask price—that is, the price of the highest priced sell order that is currently available—of a security, market price fluctuations, news event such as press release or press coverage related to the security or an industry with which the security is associated, or another parameter.
Certain embodiments permit the investor to designate the reconfiguration event or details about the reconfiguration event, for example, from a number of choices. If the reconfiguration event is time, the reconfiguration event may be the passage of a certain number of milliseconds, seconds, minutes, hours, days, weeks, or months, or may include reaching a specified time such as 12:00 p.m. Central Time or 4:00 p.m. Eastern Time. If the reconfiguration event is a bid price or ask price available in the forum, the system may request information regarding such price from an information source at certain pre-determined or investor designated intervals (e.g., every millisecond, every second, every 10 seconds, every 30 seconds, every 5 minutes, etc.). In other embodiments, the reconfiguration event is selected implicitly by the selection of a certain type of request or is predetermined by a financial institution.
In each reconfigured order, the dynamic parameter may differ by a certain amount, termed an “increment” for purposes of this application. The increment may be static such that the dynamic parameter differs by the same amount in each successive order (e.g., dynamic parameter such as limit price goes up/down by 1 cent in each iteration; in other words, if the increment is $0.05 and start point=$20 price, then 1st iteration=$20.05; 2nd iteration=$20.10; 3rd iteration=$20.15). In other embodiments, the increment may evolve according to a pattern (e.g., dynamic parameter such as limit price goes up/down by number in, for example, an arithmetic sequence, geometric sequence, triangular numbers, square numbers, cube numbers, or Fibonacci numbers in each iteration). Also, the increment may be randomly selected within a boundary (e.g., instruct the system to generate random incremental changes between 1 and 10 units every iteration). In addition, the increment may be multi-directional such that a dynamic parameter moves in one direction for one or more iterations, and then moves in a second direction for one or more iterations (e.g., dynamic parameter goes up 2 units, up 2 units, down 1 unit, down 3 units, up 1 unit, etc.). The increment may also be unidirectional such that the value goes upward in every iteration, or, in other embodiments, the increment may be unidirectional such that the value goes downward in every iteration.
The increment value also may be expressed as the number of orders that the financial institution should send to the forum (e.g., 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 in, for example, evenly spaced time intervals between the start point and the end point).
The direction of the increment value may be implied, predetermined, or selected by the investor. When selected by the investor, the “+” sign may be used to indicate moving in an upward direction and the “−” sign may be used to indicate moving in a downward direction. Other known symbols may be used as well.
The increment value also may be an ordered list of non-numeric values such as a list of securities (e.g., 1. Dell, 2. IBM, 3. Apple, etc.) for purposes of a non-numeric dynamic parameter.
The group of parameters described above that are typically designated in the request and provide instructions regarding preparing reconfigured orders are termed “reconfiguration parameters” for purposes of this application. Specifically, reconfiguration parameters include at least one of a dynamic parameter, start point, end point, an increment, or reconfiguration event.
The set of parameters in each reconfigured order is termed “iterative reconfigured parameters” for purposes of this application. Specifically, for purposes of discussion, an embodiment may include initial parameters that indicate: buy 100 shares of Dell stock, and the reconfiguration parameters indicate a dynamic parameter that is the limit price, starting point is $20.00, ending point is $20.03, and the increment is one cent. In such an embodiment, the iterative reconfigured parameters for the first iteration reconfigured order would be buy 100 shares of Dell stock at $20.01 and below. The iterative reconfigured parameters for the second iteration reconfigured order would be buy 100 shares of Dell stock at $20.02 and below. The iterative reconfigured parameters for the third iteration reconfigured order would be buy 100 shares of Dell stock at $20.03 and below.
A financial institution may provide a system by which a trading screen can be viewed by a customer. A trading screen is configured to permit a customer to designate certain parameters, such as initial order parameters and reconfiguration parameters, for a trade to form an order. The trading screen may offer an option to finalize and transfer the order to the financial institution. The system and methods permit the financial institution to receive and review such as to validate the order to ensure that the request includes all of the relevant information. The system and methods permit the financial institution to prepare and send the initial parameters order, possibly as a market order, limit order, or other type of order. Certain embodiments of the system can detect whether the reconfiguration event has occurred on a periodic basis. In embodiments in which the reconfiguration event is time, the order remains active in the forum and available for execution for the selected time interval. At the end of the time interval, an inquiry is conducted to ascertain whether the order has been fully filled. If the order has been fully filled, a confirmation of the trade execution is transmitted to the investor, and the process ends. If, after the first inquiry, the order is not fully filled, an evaluation regarding whether the dynamic parameter has reached the end point is performed. If the dynamic parameter has reached the end point, the order remains on the forum until it expires or is cancelled. If the dynamic parameter has not reached the end point, the order is cancelled automatically and the financial institution receives a confirmation of the cancelled status of that iteration of the order. In certain embodiments, a second inquiry may be conducted to review the status of the previous iteration of the order. Upon finding that the order has been cancelled, a reconfigured order is prepared by taking the dynamic parameter value of the previous iteration and increasing or decreasing the value by the value of the increment (or moving to a subsequent item on an increment list in the case of non-numeric dynamic parameters). The reconfiguration also may include changing the quantity parameter in the order, especially if any part of the order was filled in the previous iteration. However, some orders are designated “all or nothing” orders, and the quantity never changes among the reconfigured orders resulting from a single request. After reconfiguration, the reconfigured order is sent to the forum and certain method steps are repeated until the pending order is completely filled, the dynamic parameter reaches the end point, or the order expires or is cancelled.
When an order is sent to a forum, it may be always sent to a single forum or one of multiple forums. The multiple forums may be selected using investor-identified selection criteria or financial institution generated selection criteria, or random selection. In each selection process, the criteria may include best prices available, bandwidth for electronic transfer, rate of execution, transaction costs, or other criteria. Certain sets of the selection criteria may be termed “smart routing” of trading orders, in which certain algorithms are used to select the forum.
The present invention and its attributes and advantages will be further understood and appreciated with reference to the detailed description below of presently contemplated embodiments, taken in conjunction with the accompanying drawings.
The preferred embodiments of the invention will be described in conjunction with the appended drawings provided to illustrate and not to the limit the invention, where like designations denote like elements, and in which:
Embodiments of the trading system may permit sending information regarding the order status to the investor at certain points, as illustrated in FIG. 1B. For example, information may be transmitted to the investor before the end of the method 118A and 118B or before preparing a next iteration reconfigured order in step 118C. The order status may be transmitted to the customer by, for example, sending an email, sending a text message such as an SMS, providing a system notification such as a pop-up screen or a push notification, populating a section of a status chart 80, calling the customer with an automated message, showing a status display, or other information transfer method known in the art.
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In certain embodiments, the server 30 assigns and sends the client identifier 32 to the client system 20 upon interaction between the client system 20 and the server system 30. The server system 30 and client system 20 interact by exchanging data via a communications link 29.
Computer system 20 includes an input/output display interface 21 connected to communication infrastructure 22—such as a bus—, which forwards data such as graphics, text, and information, from the communication infrastructure 22 or from a frame buffer (not shown) to other components of the computer system 20. The input/output display interface 21 may be, for example, a keyboard, touch screen, joystick, trackball, mouse, monitor, plasma display, rear projector, speaker, printer, any other computer peripheral device, or any combination thereof, capable of entering and/or viewing data. While most common input/output display interfaces 21 are designed to present information dynamically in a visual medium, tactile displays, usually intended for the blind or visually impaired, use mechanical parts to dynamically update a tactile image (usually of text) so that the image may be felt by the fingers.
Embodiments of computer system 20 include one or more processors 23, which may be a special purpose or a general-purpose digital signal processor that processes certain information. Computer system 20 also may include a main memory 24, for example random access memory (“RAM”), read-only memory (“ROM”), mass storage device, or any combination thereof. Computer system 20 may also include a secondary memory 25 such as a hard disk unit 26, a removable storage unit 27, or any combination of secondary memories. Computer system 20 may also include a communication interface 28, for example, a modem, a network interface (such as an Ethernet card or Ethernet cable), a communication port, a PCMCIA slot and card, wired or wireless systems (such as Wi-Fi, Bluetooth, Infrared), local area networks, wide area networks, intranets, or anything else that permits the sending and receiving of data such as trading requests and information regarding trading.
It is contemplated that the main memory 24, secondary memory 25, communication interface 28, or a combination, function as a computer usable storage medium, otherwise referred to as a computer readable storage medium, to store and/or access computer software including computer instructions. For example, computer programs or other instructions may be loaded into the computer system 20 such as through a removable storage device, for example, a floppy disk, ZIP disks, magnetic tape, portable flash drive, optical disk such as a CD or DVD or Blu-ray, Micro-Electro-Mechanical Systems (“MEMS”), nanotechnological apparatus. Specifically, computer software including computer instructions may be transferred from the removable storage unit 27 or hard disc unit 26 to the secondary memory 25 or through the communication infrastructure 22 to the main memory 24 of the computer system 20. In certain embodiments, computer readable storage mediums exclude any transitory signals.
Embodiments of a communication interface 28 allows software, instructions and data to be transferred between the computer system 20 and external devices or external networks. Software, instructions, and/or data transferred by the communication interface 28 are typically in the form of signals that may be electronic, electromagnetic, optical, or other signals capable of being sent and received by the communication interface 28. Signals may be sent and received using wire or cable, fiber optics, a phone line, a cellular phone link, a Radio Frequency (“RF”) link, wireless link, or other communication channels.
Computer programs, when executed, enable the computer system 20, particularly the processor 23, to implement the methods of the invention according to computer software including instructions.
The computer system 20 may perform any one of, or any combination of, the steps of any of the methods described in this application. It is also contemplated that the methods according to the invention may be performed automatically, or may be invoked by some form of manual intervention.
The computer system 20 of
The computer system 20 may be in the form of a desktop computer, laptop computer, tablet computer, netbook computer, or a handheld device including, for example, a personal digital assistant (“PDA”), smart hand-held computing device, cellular telephone, hand held console, or MP3 player, such as an iPad®, iPad Touch® or Phone®.
Specifically, the cloud computing system 40 includes at least one client computer 20. The client computer 20 may be any embodiment of a computer system 20 described above. The client computer 20 establishes communication with the Internet 29A—specifically to one or more cloud servers—to, in turn, establish communication with one or more cloud data centers 43. A cloud data center 43 includes one or more networks 41a, 41b, 41c managed through a cloud management system 44. Each network 41a, 41b, 41c includes cloud resource servers 42a, 42b, 42c, respectively. Cloud servers 42a, 42b, 42c permit access to a collection of computing resources and components that can be invoked to instantiate a virtual machine, process, or other resource for a limited or defined duration. For example, one group of cloud resource servers can host and serve an operating system or components thereof to deliver and instantiate a virtual machine. Another group of cloud resource servers can accept requests to host computing cycles or processor time, to supply a defined level of processing power for a virtual machine. A further group of cloud resource servers can host and serve applications to load on an instantiation of a virtual machine, such as an email client, a browser application, a messaging application, or other applications or software.
The cloud management system 44 may comprise a dedicated or centralized cloud server and/or other software, hardware, and network tools to communicate with one or more networks 41a, 41b, 41c, such as the Internet or other public or private network, with all sets of cloud resource servers 42a, 42b, 42c. The cloud management system 44 may be configured to query and identify the computing resources and components managed by the set of cloud resource servers 42a, 42b, 42c needed and available for use in the cloud data center 43. Specifically, the cloud management system 44 may be configured to identify the hardware resources and components such as type and amount of processing power, type and amount of memory, type and amount of storage, type and amount of network bandwidth and the like, of the set of cloud resource servers 42a, 42b, 42c needed and available for use in the cloud data center 43. Likewise, the cloud management system 44 can be configured to identify the software resources and components, such as type of Operating System (“OS”), application programs, and the like, of the set of cloud resource servers 42a, 42b, 42c needed and available for use in the cloud data center 43.
The present invention is also directed to computer products, otherwise referred to as computer program products, to provide software to the cloud computing system 40. Computer products store software on any computer useable medium, known now or in the future. Such software, when executed, may implement the methods according to certain embodiments of the invention. Examples of computer useable mediums include, but are not limited to, primary storage devices (e.g., any type of random access memory), secondary storage devices (e.g., hard drives, floppy disks, CD ROMS, ZIP disks, tapes, magnetic storage devices, optical storage devices, Micro-Electro-Mechanical Systems (“MEMS”), nanotechnological storage device, etc.), and communication mediums (e.g., wired and wireless communications networks, local area networks, wide area networks, intranets, etc.). It is to be appreciated that the embodiments described herein may be implemented using software, hardware, firmware, or combinations thereof.
The cloud computing system 40 of
In certain embodiments, a buy/sell field 52D permits the investor to enter a choice between buy or sell, while other embodiments permit the investor to enter a choice between “buy to open”, “buy to close”, “sell to open”, or “sell to close”.
The fields and other content on a web page 33 may be configured to permit improved usability. For example, information may be displayed in a simplified manner such that the user is not overwhelmed. Certain information may be split into multiple web pages 33 such that a single web page 33 does not become cluttered.
Certain embodiments of the present invention implement a predetermined formula for the start point or the end point, such that a start point field 52F and an end point field 52G are not necessary or are populated automatically by the system. In certain embodiments, a predetermined formula may include calculating a reference value, or a certain unit amount above or below a reference value to determine a resulting value. A reference value may include a national best bid and offer or “NBBO”, a local best bid and offer, bid price, ask price, market last traded price, investor last traded price, closing price, volume weighted average price, moving average, bid quantity, or ask quantity. A “closing price” is the last price at which a security traded during a regular trading session. In certain embodiments, the reference value is ascertained at the time the initial parameters are set (by, for example, communicating with an external source of such information), and each subsequent order is prepared based on that reference value. In other embodiments, the reference value may be ascertained a number of times, for example, after a certain number of unfulfilled iterations of orders. In certain embodiments, the start point or end point may be determined by the “best of” a group of the resulting values calculated by the system.
In certain embodiments, predetermined formula is used to calculate only the start point. In such embodiments, the investor may select the end point, or the end point may be determined by a second formula, for example, 10 units above or below the start point.
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Certain embodiments permit the display of all relevant fields 52 of a request in one webpage 33, examples of such embodiments are illustrated in
In an embodiment illustrated in FIG. 10A—
Another embodiment of a web page 33C is illustrated in
Before describing the trading strategies that an investor may select, a few terms are defined. A “call option” or “call” gives a buyer of the contract the right to purchase the underlying asset and gives the seller the obligation to sell a set number of shares of the underlying stock at a specified price—termed the “strike price” on or before the date the contract expires. A “put option” or “put” gives the buyer of the contract the right to sell the underlying asset and give the seller of the contract the obligation to buy a set number of shares of the underlying asset at a specified price—also termed a “strike price” on or before the date contract expires.
Generally, trading strategies may include one or more “spread trades”, which is the simultaneous purchase of one security and sale of a related security, each called legs, as a unit. Embodiments of spread trades may include two-legs, three-legs, or four-legs, etc. In certain embodiments, all legs of a trade are made simultaneously or not at all. In other words, in embodiments having two or more legs, the dynamic parameter for each and every leg must be fulfilled in for the trade to be executed.
Certain trading strategies for options and futures options may include “call spread”, “put spread”, “straddle”, “strangle”, “vertical spread”, “calendar spread”, “diagonal spread”, or other spread trades.
A “call spread” is a spread strategy that involves either buying a call with a lower strike and selling a call with a higher strike, or selling a call with a lower strike and buying a call with a higher strike.
A “put spread” is a spread strategy that involves either selling a put with a higher strike and buying a put with a lower strike, or buying a put with a higher strike price and selling a put with a lower strike price.
A “straddle” is a trading strategy in which a call and a put with the same strike price and expiration are both bought (“long” straddle) or sold (“short” straddle).
A “strangle” is a spread strategy involving buying a put option (“long put”) and a long call or a short put and a short call with different strikes but the same expiration. The most common strangles involve out-of-the-money options. An “out-of-the-money option” is an option that has no intrinsic value because its strike price is above (in the case of a call) or below (in the case of a put) the current market price of the underlying unit, and extrinsic or time value is the only component of an out-of-the-money option's price.
A “vertical spread” is a spread strategy that involves buying at least one option and selling at least one option in which each option has the same expiration, but different strike prices.
A “calendar spread” or “horizontal spread” is a spread strategy that involves buying at least one option and selling at least one option in which each option has the same strike price, but a different expiration than the other.
A “diagonal spread” is a spread strategy that involves buying at least one option and selling at least one option in which each option has a different strike price and a different expiration than each other option.
Certain embodiments in which trade strategies are implemented permit the investor to enter a start point and an end point for a dynamic parameter in each leg of the trade. Accordingly, certain requests 50 include a start point field 52F and an end point field 52G for each leg of a trade. Other embodiments implement a predetermined formula for the start point and the end point, such that a start point field 52F and an end point field 52G are not necessary. As described above, a predetermined formula may include a certain percentage above or below some reference value, which may include a national best bid and offer or “NBBO”, a local best bid and offer, bid price, ask price, last available price, average price over a time period, or closing price of a security. Each leg may have its own predetermined formula or each leg may have the same predetermined formula.
For example, in a two-leg trade in which the dynamic parameter is the price at which investor is willing to execute the trade, one leg may have a starting price at 10% below the ask price and a second leg may have a starting price at 10% above a bid price. In each iteration, the dynamic parameter in each leg may decrease or increase respectively.
In another example, in a two-leg trade in which the dynamic parameter is the price at which investor is willing to execute the trade, one leg may have a starting price 10% below the ask price and a second leg may have a starting price at 6% above a bid price.
Certain embodiments may have a predetermined or investor-designated number of iterations, for example, 3, 4, 5, 6, 7, 8, 9, 10, 11, etc.). Such embodiments will not include an increment field 52H.
The selection of a trading strategy may generate a webpage 33 with a specific set of fields 52. Or, certain embodiments are preconfigured to permit creation of a specific type of request that permits implementation of a two-or-more-leg trade.
Certain embodiment of a web page 33C include a security instrument field 52B and a request type field 52I. The choice of a “call spread” strategy permits the investor to enter certain parameters for each of a first leg 60A and a second leg 60B. Specifically, the web page 33 includes a first buy/sell field 52C1, a second buy/sell field 52C2, a first quantity field 52D1, a second quantity field 52D2, a start point designation 62, an end point designation 64.
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In embodiments such as those illustrated in
When the investor is prepared to submit the request to the financial institution, the investor may select the “preview” navigation indicator 58C. In certain embodiments, a preview screen 72 is displayed in which certain parameters of the request, account information, and other information may be displayed. The preview screen 72 may include a “place order” navigation indicator 58D or a “cancel” navigation indicator 58E. Activating such as by clicking on or otherwise selecting the “cancel” navigation indicator 58E causes the preview screen 72 to disappear and permits the investor to amend the request if desired. Activating a “place order” navigation indicator 58D causes the request to be transferred to the financial institution. In certain embodiments, transferring the request also causes the display of a confirmation screen 74 that may include a confirmation statement, a reference number, the time the request was submitted, instructions, and other information. An embodiment of a web page 33C including a confirmation screen 74 is illustrated in
Embodiments of a status bar display 82B1 may include a price description 86, one or more bar display labels 88, and a progression bar 90. A price description 86 may describe the price in a currently pending order. A first bar display label 88A may identify an initial bid price, a second bar display label 88B may identify a midpoint, and a third bar display label 88C may identify an initial ask price. A progression bar 90 may provide information about the dynamic parameter in the pending order relative to the other iterations of such parameter. In
An order status icon column 80K may include detailed status icons 82A. Interaction with an order status icon 82A will cause the reveal of an order status display 82B. The order status display 82B illustrated in
An action column 80L may include action buttons 84 such as a cancel request action button 84A and a trade action button 84B. Activation of the cancel request action button 84A permits the investor to cancel the request, for example, at any time before the request expires or after a certain number of iterations have been sent to the forum.
While the disclosure is susceptible to various modifications and alternative forms, specific exemplary embodiments of the present invention have been shown by way of example in the drawings and have been described in detail. It should be understood, however, that there is no intent to limit the disclosure to the particular embodiments disclosed, but on the contrary, the intention is to cover all modifications, equivalents, and alternatives falling within the scope of the disclosure as defined by the appended claims.
