Option Strategies

Follow these steps to implement the short call calendar 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(2024, 9, 1);
    SetEndDate(2024, 12, 31);
    SetCash(500000);

    UniverseSettings.Asynchronous = true;
    var option = AddOption("GOOG", Resolution.Minute);
    _symbol = option.Symbol;
    option.SetFilter(universe => universe.IncludeWeeklys().CallCalendarSpread(0, 30, 60));
}

def initialize(self) -> None:
    self.set_start_date(2024, 9, 1)
    self.set_end_date(2024, 12, 31)
    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_calendar_spread(0, 30, 60))

The CallCalendarSpreadcall_calendar_spread filter narrows the universe down to just the two contracts you need to form a short call calendar spread.

2. In the OnDataon_data method, select the strike price and expiration dates of the contracts in the strategy legs.

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

    // Get the ATM strike
    var atmStrike = chain.OrderBy(x => Math.Abs(x.Strike - chain.Underlying.Price)).First().Strike;

    // Select the ATM call Option contracts
    var calls = chain.Where(x => x.Strike == atmStrike && x.Right == OptionRight.Call);
    if (calls.Count() == 0) return;

    // Select the near and far expiry contracts
    var expiries = calls.Select(x => x.Expiry).ToList();
    var nearExpiry = expiries.Min();
    var farExpiry = expiries.Max();

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 ATM strike
    atm_strike = sorted(chain, key=lambda x: abs(x.strike - chain.underlying.price))[0].strike

    # Select the ATM call Option contracts
    calls = [i for i in chain if i.strike == atm_strike and i.right == OptionRight.CALL]
    if len(calls) == 0:
        return

    # Select the near and far expiry dates
    expiries = sorted([x.expiry for x in calls])
    near_expiry = expiries[0]
    far_expiry = expiries[-1]

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

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

var optionStrategy = OptionStrategies.ShortCallCalendarSpread(_symbol, atmStrike, nearExpiry, farExpiry);
Buy(optionStrategy, 1);

option_strategy = OptionStrategies.short_call_calendar_spread(self._symbol, atm_strike, near_expiry, far_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 nearExpiryCall = calls.Single(x => x.Expiry == nearExpiry);
var farExpiryCall = calls.Single(x => x.Expiry == farExpiry);

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

near_expiry_call = [x for x in calls if x.expiry == near_expiry][0]
far_expiry_call = [x for x in calls if x.expiry == far_expiry][0]

legs = [
    Leg.create(near_expiry_call.symbol, 1),
    Leg.create(far_expiry_call.symbol, -1)
]
self.combo_market_order(legs, 1)

The short call calendar spread is a limited-reward-limited-risk strategy. The payoff at the shorter-term expiration is

The following chart shows the payoff at expiration:

The maximum profit is the net credit received, $C^{\textrm{long-term}}_0 - C^{\textrm{short-term}}_0$. It occurs when the underlying price moves very deep ITM or OTM so the values of both calls are close to zero.

The maximum loss is undetermined because it depends on the underlying volatility. It occurs when $S_T = S_0$ and the spread of the 2 calls are at their maximum.

If the Option is American Option, there is a risk of early assignment on the contract you sell. If you don't close the call positions together, the naked short call will have unlimited drawdown risk after the long call expires.

The following table shows the price details of the assets in the short call calendar spread:

Therefore, the payoff at time $T$ (the expiration of the short-term call) is

So, the strategy gains $540.

The following algorithm implements a short call calendar spread Option strategy:

public class BearPutSpreadStrategy : QCAlgorithm
{
    private Symbol _symbol;

    public override void Initialize()
    {
        SetStartDate(2024, 9, 1);
        SetEndDate(2024, 12, 31);
        SetCash(500000);

        var option = AddOption("GOOG", Resolution.Minute);
        _symbol = option.Symbol;
        option.SetFilter(universe => universe.IncludeWeeklys().CallCalendarSpread(0, 30, 60));
    }

    public override void OnData(Slice slice)
    {
        if (Portfolio.Invested) return;

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

        // get at-the-money strike
        var atmStrike = chain.OrderBy(x => Math.Abs(x.Strike - chain.Underlying.Price)).First().Strike;

        // filter the call options from the contracts which is ATM in the option chain.
        var calls = chain.Where(x => x.Strike == atmStrike && x.Right == OptionRight.Call);
        if (calls.Count() == 0) return;

        // sorted the optionchain by expiration date
        var expiries = calls.Select(x => x.Expiry).OrderBy(x => x);

        // select the farest expiry as far-leg expiry, and the nearest expiry as near-leg expiry
        var nearExpiry = expiries.First();
        var farExpiry = expiries.Last();

        var optionStrategy = OptionStrategies.ShortCallCalendarSpread(_symbol, atmStrike, nearExpiry, farExpiry);
        // We open a position with 1 unit of the option strategy
        Buy(optionStrategy, 1);
    }
}

class LongCallCalendarSpreadStrategy(QCAlgorithm): 
    def initialize(self) -> None:
        self.set_start_date(2024, 9, 1)
        self.set_end_date(2024, 12, 31)
        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_calendar_spread(0, 30, 60)

    def on_data(self, data: Slice) -> None:
        # avoid extra orders
        if self.portfolio.invested: return

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

        # get at-the-money strike
        atm_strike = sorted(chain, key=lambda x: abs(x.strike - chain.underlying.price))[0].strike

        # filter the call options from the contracts which is ATM in the option chain.
        calls = [i for i in chain if i.strike == atm_strike and i.right == OptionRight.CALL]
        if len(calls) == 0: return

        # sorted the optionchain by expiration date
        expiries = sorted([x.expiry for x in calls], key = lambda x: x)
        
        # select the farest expiry as far-leg expiry, and the nearest expiry as near-leg expiry
        near_expiry = expiries[0]
        far_expiry = expiries[-1]

        option_strategy = OptionStrategies.short_call_calendar_spread(self.symbol, atm_strike, near_expiry, far_expiry)
        # We open a position with 1 unit of the option strategy
        self.buy(option_strategy, 1)

Other Examples

For more examples, see the following algorithms: