Trading monthly complex options trades through April proved tricky. The process was rendered even trickier for Think-or-Swim clients because TOS picked that time period to upgrade their platform again. That upgrade resulted in some temporary lack of functionality in their "Analyze" page. That's the page that allows traders to set up and follow their trade and also try out various adjustments to gauge their effect. The fixes on the glitches are promised but not yet completed as this article is edited for publication.

Another problem soon presented itself, too. That problem was going to make trading difficult for those who trade by the Greeks or watch how their projected profit-and-loss lines look.

Delta--the Greek that measures how much the profit or loss is likely to grow with a one-point change in the underlying--is probably the most frequently watched Greek. Since most charts are set up to show how the profit-and-loss (PnL) line changes when the price of the underlying changes, many traders are watching how the trade's deltas impact their trade, even when they don't realize that's what they're doing. It is possible to graph the PnL line against a change in time or implied volatilities on some platforms. However, the default is usually to graph it against a change in the price of the underlying. That's what's shown below in the two graphs, one from OptionNet Explorer and the second from TOS, both snapped on April 23, 2014.

Live Trade on April 23, 2014, as Shown by OptionNet Explorer:

Live Trade on April 23, 2014, as Shown by Think-or-Swim:

On the ONE chart, the pulldown tab shows the then-current profit (including two-way commissions) as well as the relevant Greeks. On the TOS chart, the middle line under "Price Slices" shows the then-current profit (excluding two-way commissions) as well as the relevant Greeks.

Let's take the case of the PnL line itself, so that those who aren't interested in talking about deltas will see what is being discussed. Look over toward the left-hand expiration breakeven, just above 1104. Looking at ONE, we can guestimate that if the RUT were to drop all the way to that expiration breakeven on the day that graph was snapped, the theoretical loss would be about $4,800. I can actually give a more specific number since I'm able to move the tab to that level. It's $4,874.

Follow the same tactic on the TOS chart. It appears that the theoretical loss would be much less than $4,874. In fact, it's $3,236. We have to add in the cost of the two-way commissions: $365.00, which is already calculated in on ONE but not on TOS. This trade required all butterflies to be moved lower three times and part of them to then be moved higher again to keep that expiration tent over the current prices, resulting in those high commissions.

Follow the charts to the upside breakevens, and you'd find a difference in theoretical profits there, too, although it's more difficult to ballpark just looking at the charts. What gives? The answer lies in the calculated theoretical deltas. The ONE chart shows current position deltas of +35.29, while the TOS chart shows current position deltas of +1.25. The ONE deltas are much more positive than the TOS deltas. That means that the ONE chart predicts that the PnL line will be hurt more by a sharp drop (since deltas are more positive) than the TOS chart does.

The trades are the same. Why aren't the deltas the same?

They were until TOS made that upgrade. All platforms are going to have slightly different calculations and sometimes differences that are not "slightly different." ONE and TOS had tracked each other fairly well until TOS's early April upgrade, however, with only minor differences. After TOS's upgrade, they no longer tracked so well. Since TOS was the platform that upgraded, I'm assuming that TOS made a change in the way it calculated the Greeks that lowered the deltas.

So, I'm left with the question as to which I should trust. It matters that I know what to believe, especially during a month that the RUT has been quite volatile. I typically like to keep the deltas at +/-5 deltas/butterfly contract. This month, I have a smaller position than is typical for me, only 10 contracts. You can see that ONE is likely to show that I need an adjustment on the way down far sooner than TOS will, and vice versa on an upside move, but I don't want to over-adjust in either direction.

I could track the PnL with various price changes in the RUT in an effort to determine which appears more reliable. However, when markets are moving big, you can bet that implied volatilities are moving big, too, and bid/ask spreads are widening, sometimes unevenly. It's not quite as easy to say the RUT rose 10 points and the PnL changed only about $13.00, so the TOS deltas and PnL line must be the most accurate. However, I would do exactly that over a period of time in quieter markets to make my assessment.

I had another tool to use, however: my long-term use of both platforms. Because of my long-term use of both platforms, I knew that, in the past when they still tracked each other, both TOS and ONE tended to be a little more positive delta than was borne out by the changes in profits and loss. TOS and ONE deltas both tended to be more positive than the same position on OptionVue, too, as traders with both platforms pointed out to other traders. Therefore, for a long while, I've been adjusting my trades as if they're off by about +3 deltas/butterfly contract. My conclusion now is that the trade will likely behave as if the ONE deltas are slightly too positive. I will adjust accordingly, just as I have been for the last several months. Since TOS deltas are now less positive than ONE's, that may mean that TOS deltas are now more accurate. However, I can't be sure of that when some TOS features are clearly still not working correctly and I haven't had the opportunity to track the behavior against price changes during quiet market times. That hesitancy to believe too quickly that TOS's deltas are now more valid is warranted when the Monitor page on TOS frequently shows N/A on the position Greeks.

TOS management has been upfront in addressing how long it will take to sort out the problems, but I will need experience in watching how the trades PnL reacts to certain price changes to attain any comfort level. Since ONE changed nothing in their calculation, I'll continue to base my adjustments on ONE. I'll continue to assume that its deltas still track what TOS used to show for deltas and will adjust accordingly, assuming that the trade will act as if it's about 3 deltas/contract less positive than ONE shows (and TOS used to show) it to be.

I'll have to get to know how the trade acts again in comparison to what it's showing. However, if I hadn't known these platforms through comparing how the trade behaved with what they were showing, I might not have known what to do when those differences showed up.

What if I'd had only TOS, and not ONE, so I hadn't immediately noticed a difference? I like to think that my familiarity with TOS would have shown me that the trade was behaving differently than I expected it to behave based on the Greeks and the theoretical PnL line. I also am 100 percent certain that my familiarity with the quirks that can show up after one of TOS's too-frequent-for-my-liking upgrades would have alerted me to be on the lookout for any changes or unintended consequences. I've long learned to save my page showing the open trades before a known upgrade, if we're alerted of an upcoming one, or every Friday during volatile times since most upgrades are made over the weekend. Again, that comes from familiarity with the platform I'm using.

Getting to know your platform can repay you with equanimity when you must place trades during volatile times. If you don't know your platform as well as you should, look for videos that will familiarize you with its features. In preparation for this article, I went to YouTube and looked for videos on a trading platform I had never investigated. I found plenty on this lesser-known platform. Take advantage of all these tactics. Open a paper money or simulated trading account if they're offered free and watch how your trades behave. Place trades and set up contingent orders. Such familiarity will benefit your trading.

Linda Piazza