Why Options Traders Often Chart the Underlying or the Strategy
Summary
The document considers why retail platforms often show live options quotes but little historical price data for individual contracts. For directional trades, the underlying asset’s chart can guide timing because the option’s value depends on the underlying. In that setting, an option price chart may mainly help refine the order price.
Options traders also use contracts for volatility exposure, risk management, or positions built from multiple options. A chart of one contract may tell little about the performance of a multi-leg position, so traders may rely on strategy-level charts, volatility charts, or mathematical pricing models. A model-based payoff or value chart can show how an option position changes over time or across market conditions. The discussion is qualitative and notes that chart needs vary by trader and method; it does not explain platform data availability or provide evidence that historical contract charts are generally unused.
Key ideas
- Underlying asset charts can help plan directional options trades.
- Single-contract price charts may not describe the risk of a multi-leg options position.
- Volatility charts and strategy-level views can be more useful for some options traders.
- Chart preferences depend on the trader’s strategy, and the document offers no definitive account of platform data availability.
Tags
Full text
# Why don't options traders use charts? Or do they? # Why don't options traders use charts? Or do they? Retail trading platforms typically offer equity charts but only instantaneous quotes on options. It seems like even a few minutes of historical data would be useful when entering an order. Are charts not offered because traders don't use them, or do options traders typically subscribe to third party data sources for charts? I'm aware of charts as devices to explain the value of an option contract with respect to the underlying. I'm interested in learning about why charts that show the historic price of a specific contract over time seem hard to find. ## Answer by strimp099 (score 2, accepted) https://quant.stackexchange.com/a/4035 I suppose there is no right answer (and I'm not entirely sure this questions fits here) but try these two: - Given options are derivatives, their value is dependent on the underlying. So if you are taking a directional bet using options, you can use charts of the underlying because the option will follow. - Professional options traders (and even serious ones) generally use options for risk management or taking bets that you cannot take with the underlying - such as on volatility. Therefore they will combine two or more contracts together making a chart of this type of position relatively worthless. If you think about it, the "hockey stick" charts can really be considered a chart in time if you add a plot of BSM or some other pricing model. Also, you've probably seen surface charts associated with options positions. These often have an axis in time as well. ## Answer by Atrad (score 0) https://quant.stackexchange.com/a/4040 I think the answer depends on the trader's methodology and who you mean by "option trader". For example, some traders place directional bets using options/leaps when the structure of market points to early trend stage on longer time frame. Or when a market is over extended but no clear point to place a stop. In both these cases, chart of the underlying market is more useful to plan and decide the trade. Option price chart here is more to refine the order price (if needed). On other hand, I suspect traders whose methodology relies on capturing premiums for positive edge would probably use various option charts besides option price chart and also rely on math more. So in short, there is no one right answer as suggested by above two excellent comments.
Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.