Option Strategies

Follow these steps to implement the bull call spread strategy:

1. In the Initializeinitialize method, set the start date, end date, cash, and Option universe.

private Symbol _symbol;

public override void Initialize()
{
    SetStartDate(2017, 2, 1);
    SetEndDate(2017, 3, 5);
    SetCash(500000);

    UniverseSettings.Asynchronous = true;
    var option = AddOption("GOOG", Resolution.Minute);
    _symbol = option.Symbol;
    option.SetFilter(universe => universe.IncludeWeeklys().CallSpread(30, 5));
}

def initialize(self) -> None:
    self.set_start_date(2017, 2, 1)
    self.set_end_date(2017, 3, 5)
    self.set_cash(500000)

    self.universe_settings.asynchronous = True
    option = self.add_option("GOOG", Resolution.MINUTE)
    self._symbol = option.symbol
    option.set_filter(lambda universe: universe.include_weeklys().call_spread(30, 5))

The CallSpreadcall_spread filter narrows the universe down to just the two contracts you need to form a bull call spread.

2. In the OnDataon_data method, select the expiration and strikes of the contracts in the strategy legs.

public override void OnData(Slice slice)
{
    if (Portfolio.Invested ||
        !slice.OptionChains.TryGetValue(_symbol, out var chain))
    {
        return;
    }

    // Select the call Option contracts with the furthest expiry
    var expiry = chain.Max(x => x.Expiry);    
    var calls = chain.Where(x => x.Expiry == expiry && x.Right == OptionRight.Call);
    if (calls.Count() == 0) return;

    // Select the ITM and OTM contract strike prices from the remaining contracts
    var strikes = calls.Select(x => x.Strike).ToList();
    var otmStrike = strikes.Max();
    var itmStrike = strikes.Min();

def on_data(self, slice: Slice) -> None:
    if self.portfolio.invested:
        return

    # Get the OptionChain
    chain = slice.option_chains.get(self._symbol, None)
    if not chain:
        return
    
    # Select the call Option contracts with the furthest expiry
    expiry = max([x.expiry for x in chain])
    calls = [i for i in chain if i.expiry == expiry and i.right == OptionRight.CALL]
    if not calls == 0:
        return

    # Select the ITM and OTM contract strike prices from the remaining contracts
    strikes = [x.strike for x in calls]
    otm_strike = max(strikes)
    itm_strike = min(strikes)

3. In the OnDataon_data method, select the contracts and place the orders.

Approach A: Call the OptionStrategies.BullCallSpreadOptionStrategies.bull_call_spread method with the details of each leg and then pass the result to the Buybuy method.

var optionStrategy = OptionStrategies.BullCallSpread(_symbol, itmStrike, otmStrike, expiry);
Buy(optionStrategy, 1);

option_strategy = OptionStrategies.bull_call_spread(self._symbol, itm_strike, otm_strike, expiry)
self.buy(option_strategy, 1)

Approach B: Create a list of Leg objects and then call the Combo Market Ordercombo_market_order, Combo Limit Ordercombo_limit_order, or Combo Leg Limit Ordercombo_leg_limit_order method.

var itmCall = calls.Single(x => x.Strike == itmStrike);
var otmCall = calls.Single(x => x.Strike == otmStrike);

var legs = new List<Leg>()
    {
        Leg.Create(itmCall.Symbol, 1),
        Leg.Create(otmCall.Symbol, -1)
    };
ComboMarketOrder(legs, 1);

itm_call = [x for x in calls if x.strike == itm_strike][0]
otm_call = [x for x in calls if x.strike == otm_strike][0]

legs = [
    Leg.create(itm_call.symbol, 1),
    Leg.create(otm_call.symbol, -1)
]
self.combo_market_order(legs, 1)

The bull call spread is a limited-reward-limited-risk strategy. The payoff is

The following chart shows the payoff at expiration:

The maximum profit is $K^{OTM} - K^{ITM} + C^{OTM}_0 - C^{ITM}_0$. If the underlying price increases to exceed both strikes at expiration, both calls are worth $(S_T - K)$ at expiration.

The maximum loss is the net debit you paid to open the position, $C^{OTM}_0 - C^{ITM}_0$.

If the Option is American Option, there is a risk of early assignment on the contract you sell.

The following table shows the price details of the assets in the algorithm:

Therefore, the payoff is

So, the strategy profits $2,356.

The following algorithm implements a bull call spread strategy:

public class BullCallSpreadExmapleAlgorithm : QCAlgorithm
{
    private Symbol _symbol;

    public override void Initialize()
    {
        SetStartDate(2017, 2, 1);
        SetEndDate(2017, 3, 5);
        SetCash(500000);

        var option = AddOption("GOOG", Resolution.Minute);
        _symbol = option.Symbol;
        option.SetFilter(universe => universe.IncludeWeeklys().CallSpread(30, 5));
    }
    
    public override void OnData(Slice slice)
    {
        if (Portfolio.Invested) return;

        // Get the OptionChain
        var chain = slice.OptionChains.get(_symbol, null);
        if (chain.Count() == 0) return;

        // Get the furthest expiration date of the contracts
        var expiry = chain.OrderByDescending(x => x.Expiry).First().Expiry;
        
        // Select the call Option contracts with the furthest expiry
        var calls = chain.Where(x => x.Expiry == expiry && x.Right == OptionRight.Call);
        if (calls.Count() == 0) return;

        // Select the ITM and OTM contract strikes from the remaining contracts
        var putStrikes = calls.Select(x => x.Strike).OrderBy(x => x);
        var itmStrike = putStrikes.First();
        var otmStrike = putStrikes.Last();

        var optionStrategy = OptionStrategies.BullCallSpread(_symbol, itmStrike, otmStrike, expiry);
        Buy(optionStrategy, 1);
    }
}

class BullCallSpreadStrategy(QCAlgorithm): 
    def initialize(self) -> None:
        self.set_start_date(2017, 2, 1)
        self.set_end_date(2017, 3, 5)
        self.set_cash(500000)

        option = self.add_option("GOOG", Resolution.MINUTE)
        self.symbol = option.symbol
        option.set_filter(self.universe_func)

    def universe_func(self, universe: OptionFilterUniverse) -> OptionFilterUniverse:
        return universe.include_weeklys().call_spread(30, 5)

    def on_data(self, slice: Slice) -> None:
        if self.portfolio.invested: return

        # Get the OptionChain
        chain = slice.option_chains.get(self.symbol, None)
        if not chain: return

        # Get the furthest expiration date of the contracts
        expiry = sorted(chain, key = lambda x: x.expiry, reverse=True)[0].expiry
        
        # Select the call Option contracts with the furthest expiry
        calls = [i for i in chain if i.expiry == expiry and i.right == OptionRight.CALL]
        if len(calls) == 0: return

        # Select the ITM and OTM contract strike prices from the remaining contracts
        call_strikes = sorted([x.strike for x in calls])
        itm_strike = call_strikes[0]
        otm_strike = call_strikes[-1]

        option_strategy = OptionStrategies.bull_call_spread(self.symbol, itm_strike, otm_strike, expiry)
        self.buy(option_strategy, 1)

Other Examples

For more examples, see the following algorithms: