Firm: Bank of America Merrill Lynch
What: Bank of America Merrill Lynch announced a new equity options algorithm, Delta Adjusted, which automatically adjusts an option order’s limit price.
Date: Launched in June 2011.
Background/Why: The algorithm was developed because clients requested an options product that would help them better source liquidity in the fragmented options market.
Prospects/Expectations: Jonathan Werts, head of broker-dealer execution services at Bank of America Merrill Lynch, told Traders Magazine that by automating the adjustment of the options order limit price, Delta Adjusted meets clients’ needs for a simple automated options algorithm. Delta Adjusted, he added, has been well received by clients who need to quickly react to a change in price with a gamma threshold.
How it Works: According to Werts, Delta Adjusted is an adaptive algo that automates traders’ work flow by automatically adjusting an option order limit price based on the underlying stock’s price movement and defined parameters.