End of Day Options Data

Paying for Data

End of day
Sunset; end of day. Pixabay

The CBOE now sells end-of-day option data. Here is their description:

"Our end-of-day option quotes with Calculations provide all the fields in the end-of-day Option quotes file plus market implied volatility for each option and the Greeks (Delta, Gamma, Theta, Vega and Rho)."

The calculations are made using data from the 15:45 time-stamp (i.e., 15 minutes before the markets close for the day), because that data is considered to represent a more accurate snapshot of true market liquidity, when compared with data available at 16:00.

Unfortunately, data is not available for index options (although you can get data for SPY if you are willing to trade those options instead of SPX (S&P 500 Index) options. Similarly, IWM options are available as a replacement for RUT (Russell 2000 Index)

The cost depends on the number of options that are available for trading for a given underlying asset. For example, a one-month subscription costs

  • AAPL or SPY cost $61.54 for one month (or $307.70 for one year.
  • IBM or IWM data costs $30.77 per month or $153.85 for one year)
  • JNJ, with many fewer options still costs $30.77


Is This Data Useful? It is Worth the Cost? 

Yes, it is useful because knowing the implied volatility and the Greeks of each option is very powerful information -- especially for the person who has never bothered to pay attention to these numbers. As an aside, if you have been trading without using this data, I'm surprised that you have survived this long.

So who needs this data?

  • Covered call writers. To earn the most money over the longer term, it pays for the somewhat bullish trader to write fewer calls (i.e., less than one option per 100 shares owned) when implied volatility is historically low and to sell the full amount (one option per 100 shares) when implied volatility is relatively high.
  • Naked put sellers. When selling out-of-the-money puts in an effort to keep the option premium as your profit, once again, your chances for success are enhanced by selling those puts when implied volatility is relatively high. The exception occurs when your true investment objective is to buy the shares below the strike price. When that is your goal, then it is important to sell the puts when you believe that your objective will be met (i.e., stock has a good chance to be below he strike price at expiration). And if the put expires worthless, then the premium becomes your consolation prize.
  • Buyers of single options -- calls, puts, or both. This is a very popular investment strategy, despite the difficulty of making money. If you have the skill to predict correctly the direction in which the stock market is heading, then you should be able to translate that into a money-making business. However, you want to know the implied volatility, as well as the delta for each option traded. If you pay too much for the options, or if they are too far out of the money (i.e., low Delta), that significantly reduces the likelihood of making money. 
  • Credit spread traders. Higher implied volatility provides a higher premium, and that is to your benefit. You must learn to find a compromise between collecting a high premium (good) vs. the probability that the spread will move into the money (bad). Knowing how to use option Delta gives you a guide to the probability.

     

    In my opinion, this data is too costly for most individual investors. However, if you are unable to trade during market hours (because you have a job, or live many time zones away), and if you like the idea of using end of day data to prepare your for the following morning, and most importantly, if you have a larger trading account and the cost is not prohibitive, you may find this data to be worthwhile. Note that the annual subscription is somewhat of a bargain: Pay for 5 months, get 7 months free.

    Until now, it was next-to-impossible for the casual investor to get useful end-of-day data for making trade decisions. One of the reasons is that market quotes at the closing bell were often quite different from quotes just a few minutes earlier. This type of quote changing is discouraged, but market makers make such changes frequently because it affects the daily closing value of their accounts.

    Such action is known as "marking."

    Paying for data is an expense best avoided. However, if you cannot trade during market hours and if there is no other way to get the needed data, this new offering from the CBOE may be useful.