How Option Traders leverage Oracle R Enterprise to
maximize trading strategies
Brian Macdonald, Oracle Data Scientist
Oracle
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How can you compete with algorithms
when your business relies on
interpersonal relationships?
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Influential Financial Trading Company
Company Name must be kept confidential
• Financial service firm that provides servicing for
stock and option trades
• Provide advisory services and would like to grow
• Access to all trade details in real time
• Lots of trade reporting, validation and value added
services.
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These guys make lots of money.
So what’s the problem?
• Competitive pressure from algorithmic trading
platforms.
• Cutting into profits, must expand
• Despite profits, very inefficient use of resources
• Potential regulatory changes
.
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Business Questions
• How can they monetize the wealth of data they have?
• How can they make their quants more effective?
• How can they leverage their data platform better?
• How can they provide better service to their customers?
Start by calculating Greeks.
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What are Greeks?
Just a brief tutorial – I only have 30 minutes
The Greeks are the quantities representing the sensitivity of
the price of derivatives such as options to a change in
underlying parameters on which the value of an instrument
or portfolio of financial instruments is dependent.*
• Calculating Greeks has well defined mathematics
• Black-Scholes
• Not terribly complicated
• But quants do it on a one off basis
*https://en.wikipedia.org/wiki/Greeks_(finance)
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What are Greeks?
Just a brief tutorial – I only have 30 minutes
• Five basic measurements (of Options)
• Delta – Sensitivity to changes in the underlying stock price.
• Gamma - Sensitivity of the Delta.
• i.e. the change in the delta for a $1 change in the underlying
• Rho - Sensitivity to changes in interest rates
• Theta - Sensitivity to time
• Vega - Sensitivity to changes in implied volatility
• Additional 2nd and 3rd Order Greeks Exist
• Vanna, Vomma, Charm, Veta, Vera, Color, Speed, Ultima, Zomma
Adapted from http://www.optionmonster.com/education/option_greeks.php and Wikipedia
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Prior Technology State
• Technology
• Relational data warehouse
• Many BI tools
• R, matlab, SQL, what ever else is in their bag o tricks
• People
• Quants
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Prior Process for Quants
• Currently download data to their workstations
• Limited by CPUs,RAM, Storage
• Use the tools they like best
• They either do big market analysis
•
Takes a long time
• Or do individual equity analysis
•
Does not scale
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Oracle R Enterprise to the Rescue
• Use a tool Quants know and love. (R)
• Leverage power of Oracle Advanced Analytics
Exadata
• Lots of memory, Lots of CPUs, Parallelization Rocks!
• Use any Open Source R package
• Chose derivmkts
• Others exist
• Has greek function for doing everything we need
•.
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The Data
• Daily Stock prices for all U.S. equities
•
•
•
•
6,033 symbols going back to 02-JAN-62
21,353,462 Rows of Daily Close data
Symbol, Trade Date, Prices, Volatility,
Can run on real time quotes
• All Option Data
• Puts and Calls
• 24,610 options
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Beautiful Code using Oracle R Enterprise
Can control the level of
parallelism.
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Updates the ASOF_DATE
Calculate
the
number
of days
Column
in
Oracle
for
the
ore.groupApply
Create
a
function
will
to
loop
run
any
as ato%
ofused
a full
year
toover
be
Creates
abedata
frame
from
date
to
calculate
Load
derivmkts
library.
rows
R
code.
grouped
by
a
columns.
used
in greeks
calculation.
the
greeks
function.
the
greeks.
Call
greeks2
to be
Updates
the function
TT Column
in
This
can
do anything
and will
Adds
some
new
columns
for
calculate
greeks.
run
for each slice
of
Oracle.
the
symbol
and expiry
OPTIONS
specified
the date
table
OPTIONS$ID
bscall
will
calculate
greeks
for
to bewill
used
Returns
the
data
frame(t1)
to
Data
be
set
to
the
table
calls. bsput will do puts.
OPTIONS
the
calling data frame
Other for
parameters
greeks
further refer to
OPTIOSN$ID
theOPTIONS
column to
columns inisthe
processing.
loop
over
table.
• Cloud Specs
Results
• 72 cores
• Memory: 512GB
25
20
15
Avg. Time
10
Min. Time
Max. Time
5
0
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What Comes Next?
Or being done that I can’t speak about.
• Develop Predictive Models based on the Greeks
• Embed into models into other applications
• Build real time recommendation engine
• Leverage Stream Analytics
• Leverage Hadoop
• Research papers/Text Analytics
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Oracle BIWA Summit 2017