Patent ID: 8744952

Claim:
A non-transitory computer-readable storage medium having instructions which, when executed on a processor, perform a method for generating a benchmark price for an option order, the method comprising: receiving a first delta value, a gamma value, a volume-weighted average price value of an underlying stock of the option, a reference price value of the underlying stock, and an original order premium value; where the first delta value is a measure of rate of change in the value of the option for a one-unit change in the price of the underlying stock; the gamma value is a measure of rate of change in the first delta value for a one-unit change in the price of the underlying stock; the reference price value of the underlying stock is a recent price of the underlying stock of the option; and the original order premium value is set for an order interval; calculating a rate of change value based on the volume-weighted average price and reference price values; calculating an adjusted delta value by multiplying the rate of change value by the gamma value, and adding the first delta value; calculating a gamma-weighted average price value by multiplying the first delta value by the rate of change value to achieve a first product, squaring the rate of change value and multiplying the squared rate of change value by the gamma value to achieve a second product, and adding the first product and ½ of the second product to the original order premium value; calculating a benchmark price for the option order based on the gamma-weighted average price value; and outputting the benchmark price for the option order; wherein the gamma-weighted average price value is calculated by multiplying the first delta value by the rate of change value to achieve a first product, squaring the rate of change value and multiplying the squared rate of change value by the gamma value to achieve a second product, and adding the first product and ½ of the second product to the original order premium value.