Options Models

Exercise

Introduction

If you exercise a long Option position or are assigned on your short Option position, LEAN processes an Option exercise order. The Option exercise model converts the Option exercise order into an OrderEvent.

Set Models

To set the exercise model of an Option, call the SetOptionExerciseModelset_option_exercise_model method of the Option object inside a security initializer.

// In the Initialize method, set the security initializer to seed initial the prices and models of assets.
SetSecurityInitializer(new MySecurityInitializer(BrokerageModel, new FuncSecuritySeeder(GetLastKnownPrices)));

class MySecurityInitializer : BrokerageModelSecurityInitializer
{
    public MySecurityInitializer(IBrokerageModel brokerageModel, ISecuritySeeder securitySeeder)
        : base(brokerageModel, securitySeeder) {}    
    
    public override void Initialize(Security security)
    {
        // First, call the superclass definition.
        // This method sets the reality models of each security using the default reality models of the brokerage model.
        base.Initialize(security);

        // Next, overwrite the Option exercise model        
        if (security.Type == SecurityType.Option) // Option type
        {
            (security as Option).SetOptionExerciseModel(new DefaultExerciseModel());
        }    
    }
}
# In the Initialize method, set the security initializer to seed initial the prices and models of assets.
self.set_security_initializer(MySecurityInitializer(self.brokerage_model, FuncSecuritySeeder(self.get_last_known_prices)))

# Outside of the algorithm class
class MySecurityInitializer(BrokerageModelSecurityInitializer):

    def __init__(self, brokerage_model: IBrokerageModel, security_seeder: ISecuritySeeder) -> None:
        super().__init__(brokerage_model, security_seeder)
    
    def initialize(self, security: Security) -> None:
        # First, call the superclass definition.
        # This method sets the reality models of each security using the default reality models of the brokerage model.
        super().initialize(security)

        # Next, overwrite the Option exercise model        
        if security.Type == SecurityType.OPTION: # Option type
            security.set_option_exercise_model(DefaultExerciseModel())

Default Behavior

The default Option exercise model is the DefaultExerciseModel. The DefaultExerciseModel fills exercise orders to the full quantity with zero fees and applies an order tag to represent if the order is an exercise or assignment. To view the implementation of this model, see the LEAN GitHub repository.

Model Structure

Option exercise models should implement the IOptionExerciseModel interface. The IOptionExerciseModel interface must implement the OptionExerciseoption_exercise method, which receives Option and OptionExerciseOrder objects and then returns a list of OrderEvent objects that contain the order fill information.

Option exercise models should extend the DefaultExerciseModel class. Extensions of the DefaultExerciseModel must implement the OptionExerciseoption_exercise method, which receives Option and OptionExerciseOrder objects and then returns a list of OrderEvent objects that contain the order fill information.

using QuantConnect.Orders.OptionExercise;

// In the security initializer, set the custom Option exercise model
(security as Option).SetOptionExerciseModel(new MyOptionExerciseModel());

// Define the custom Option exercise model outside of the algorithm
public class MyOptionExerciseModel : IOptionExerciseModel
{
    public override IEnumerable<OrderEvent> OptionExercise(Option option, OptionExerciseOrder order)
    {
        var inTheMoney = option.IsAutoExercised(option.Underlying.Close);
        var isAssignment = inTheMoney && option.Holdings.IsShort;

        yield return new OrderEvent(
            order.Id,
            option.Symbol,
            option.LocalTime.ConvertToUtc(option.Exchange.TimeZone),
            OrderStatus.Filled,
            Extensions.GetOrderDirection(order.Quantity),
            0.0m,
            order.Quantity,
            OrderFee.Zero,
            "Tag"
        ) { IsAssignment = isAssignment };
    }
}
# In the security initializer, set the custom Option exercise model
security.set_option_exercise_model(MyOptionExerciseModel())

# Define the custom Option exercise model outside of the algorithm
class MyOptionExerciseModel(DefaultExerciseModel):
    def option_exercise(self, option: Option, order: OptionExerciseOrder) -> List[OrderEvent]:
        in_the_money = option.is_auto_exercised(option.underlying.close)
        is_assignment = in_the_money and option.holdings.is_short

        order_event = OrderEvent(
            order.id,
            option.symbol,
            Extensions.convert_to_utc(option.local_time, option.exchange.time_zone),
            OrderStatus.FILLED,
            Extensions.get_order_direction(order.quantity),
            0.0,
            order.quantity,
            OrderFee.zero,
            "Tag"
        )
        order_event.is_assignment = is_assignment
        return [ order_event ]

For a full example algorithm, see this backtestthis backtest.

OptionExerciseOrder objects have the following properties:

The following table describes the arguments of the OrderEvent constructor:

Argument Details

Argument: orderIdorder_id

Id of the parent order

Data Type: int | Default Value: -

Argument: symbol

Asset Symbol

Data Type: Symbol | Default Value: -

Argument: utcTimeutc_time

Date/time of this event

Data Type: DateTimedatetime | Default Value: -

Argument: direction

The direction of the order. The OrderDirection enumeration has the following members:

Data Type: OrderDirection | Default Value: Hold

Argument: fillPricefill_price

Fill price information if applicable

Data Type: decimalfloat | Default Value: 0

Argument: fillQuantityfill_quantity

Fill quantity

Data Type: decimalfloat | Default Value: 0

Argument: orderFeeorder_fee

The order fee. You can use OrderFee.Zero or create an OrderFee object with a custom fee.

new OrderFee(new CashAmount(0.5m, "USD"));OrderFee(CashAmount(0.5, 'USD'))

Data Type: OrderFee | Default Value: -

Argument: message

Message from the exchange

Data Type: stringstr | Default Value: ""

OrderEvent objects have the following attributes:

Examples

Demonstration Algorithms
CustomOptionExerciseModelRegressionAlgorithm.py Python CustomOptionExerciseModelRegressionAlgorithm.cs C#

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