SYSTEM AND METHOD FOR ESTIMATING A SPREAD VALUE

• US 20120271754A1
• Filed: 07/03/2012
• Published: 10/25/2012
• Est. Priority Date: 03/05/2002
• Status: Abandoned Application

• Current Assignee: Trading Technologies International, Inc.
• Original Assignee: Trading Technologies International, Inc.
• Inventors: Burns, Michael J., Harris, John
• Application Number:
  US13/541,361
• Publication Number:
  US 20120271754A1
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: G06Q 30/06 Buying, selling or leasing transactions
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

An estimated spread value is computed that represents a price at which a trader might have been able to buy or sell a spread given the current market conditions of the legs. In particular, when an event occurs in one of the legs, price information is gathered from each of the other legs based on the spread definition, in addition to the defined event, and is used in estimating the value of a spread. According to one feature, the computations may be triggered by any predefined event. According to another feature, the computation may be programmed by a user to tailor the estimation process according to the type of spread being traded. The estimated spread value may be used to analyze spreads, it may be fed to other trading related software tools, or it may be used in charting.

Claims

1. A method including:

detecting by a computing device a change in market data for a first tradable object of a trading strategy, wherein the trading strategy is specified by a definition and includes the first tradeable object and a second tradeable object;

determining by the computing device a characterization for the first tradeable object based on the detected change, wherein the characterization includes characterizing the first tradeable object as one of having been bought and having been sold;

determining by the computing device an estimated strategy value for the trading strategy based on the definition for the trading strategy, the characterization for the first tradeable object, and at least one of the highest bid price and the lowest ask price for the second tradeable object; and

providing by the computing device the estimated strategy value.

2. The method of claim 1, wherein the trading strategy is a spread.

3. The method of claim 1, wherein the change in market data for the first tradeable object includes a traded price at or below a highest bid price for the first tradeable object, and wherein the first tradeable object is characterized as the first tradeable object having been bought.

4. The method of claim 1, wherein the change in market data for the first tradeable object includes a traded price at or above a lowest ask price for the first tradeable object, wherein the first tradeable object is characterized as the first tradeable object having been sold.

5. The method of claim 1, wherein the change in market data for the first tradeable object includes a traded price between a highest bid price and a lowest ask price for the first tradeable object, wherein the first tradeable object is characterized as the first tradeable object having been bought if the traded price is closer to the highest bid price for the first tradeable object and the first tradeable object is characterized as the first tradeable object having been sold if the traded price is closer to the lowest ask price for the first tradeable object.

6. The method of claim 1, wherein the change in market data for the first tradeable object includes a change in a highest bid price for the first tradeable object, and wherein the first tradeable object is characterized as the first tradable object having been bought.

7. The method of claim 1, wherein the change in market data for the first tradeable object includes a change in a lowest ask price for the first tradeable object, and wherein the first tradeable object is characterized as the first tradable object having been sold.

8. The method of claim 1, wherein the change in market data for the first tradeable object includes a change in a midpoint value for the first tradeable object.

9. The method of claim 1, wherein the estimated strategy value is based on the highest bid price for the second tradeable object when the first tradeable object is characterized as the first tradeable object having been bought and the definition for the trading strategy specifies the second tradeable object is on the opposite side of the trading strategy from the first tradeable object.

10. The method of claim 1, wherein the estimated strategy value is based on the lowest ask price for the second tradeable object when the first tradeable object is characterized as the first tradeable object having been sold and the definition for the trading strategy specifies the second tradeable object is on the opposite side of the trading strategy from the first tradeable object.

11. The method of claim 1, wherein the estimated strategy value is based on the highest bid price for the second tradeable object when the first tradeable object is characterized as the first tradeable object having been sold and the definition for the trading strategy specifies the second tradeable object is on the same side of the trading strategy as the first tradeable object.

12. The method of claim 1, wherein the estimated strategy value is based on the lowest ask price for the second tradeable object when the first tradeable object is characterized as the first tradeable object having been bought and the definition for the trading strategy specifies the second tradeable object is on the same side of the trading strategy as the first tradeable object.

13. The method of claim 1, wherein the estimated strategy value is based on the highest bid price for the second tradeable object when the second tradeable object is to be sold, and wherein the estimated strategy value is based on the lowest ask price for the second tradeable object when the second tradeable object is to be bought.

14. The method of claim 1, wherein the estimated strategy value is determined using the equation:

estimated strategy value=(m1)(value1)+(m2)(value2)

wherein m1 is a multiplier associated with the first tradeable object for the trading strategy, value1 is a traded price for the first tradeable object based on the determined characterization for the first tradeable object, m2 is a multiplier associated with the second tradeable object for the trading strategy, and value2 is (1) the lowest ask price for the second tradeable object when the first tradeable object is characterized as the first tradeable object having been bought and the second tradeable object is on a same side of the trading strategy as the first tradeable object or when the first tradeable object is characterized as the first tradeable object having been sold and the second tradeable object is on an opposite side of the trading strategy as the first tradeable object and (2) the highest bid price for the second tradeable object when the first tradeable object is characterized as the first tradeable object having been bought and the second tradeable object is on the opposite side of the trading strategy as the first tradeable object or when the first tradeable object is characterized as the first tradeable object having been sold and the second tradeable object is on the same side of the trading strategy as the first tradeable object.

15. The method of claim 1, wherein the estimated strategy value is further based on a weighted average of a plurality of highest bid prices that it would take to sell the second tradeable object or a weighted average of a plurality of lowest ask prices that it would take to buy the second tradeable object.

16. The method of claim 1, wherein the trading strategy further includes a third tradeable object, and wherein the estimated strategy value is further based on at least one of a highest bid price and a lowest ask price for the third tradeable object.