Option Strategies

Follow these steps to implement the short put 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().PutCalendarSpread(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().put_calendar_spread(0, 30, 60))

The PutCalendarSpreadput_calendar_spread filter narrows the universe down to just the two contracts you need to form a short put 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 put Option contracts
    var puts = chain.Where(x => x.Strike == atmStrike && x.Right == OptionRight.Put);
    if (puts.Count() == 0) return;

    // Select the near and far expiry contracts
    var expiries = puts.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 put Option contracts
    puts = [i for i in chain if i.strike == atm_strike and i.right == OptionRight.PUT]
    if len(puts) == 0:
        return

    # Select the near and far expiry dates
    expiries = sorted([x.expiry for x in puts])
    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.ShortPutCalendarSpreadOptionStrategies.short_put_calendar_spread method with the details of each leg and then pass the result to the Buybuy method.

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

option_strategy = OptionStrategies.short_put_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 nearExpiryPut = puts.Single(x => x.Expiry == nearExpiry);
var farExpiryPut = puts.Single(x => x.Expiry == farExpiry);

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

near_expiry_put = [x for x in puts if x.expiry == near_expiry][0]
far_expiry_put = [x for x in puts if x.expiry == far_expiry][0]

legs = [
    Leg.create(near_expiry_put.symbol, 1),
    Leg.create(far_expiry_put.symbol, -1)
]
self.combo_market_order(legs, 1)

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

The following chart shows the payoff at expiration:

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

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

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

Therefore, the payoff is

So, the strategy gains $448.

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

public class OptionStrategy : QCAlgorithm
{
    private Symbol _equity;
    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().PutCalendarSpread(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 put options from the contracts which is ATM in the option chain.
        var puts = chain.Where(x => x.Strike == atmStrike && x.Right == OptionRight.Put);
        if (puts.Count() == 0) return;

        // sorted the optionchain by expiration date
        var expiries = puts.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.ShortPutCalendarSpread(_symbol, atmStrike, nearExpiry, farExpiry);
        // We open a position with 1 unit of the option strategy
        Buy(optionStrategy, 1);
    }
}

class PutCalendarSpreadStrategy(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().put_calendar_spread(0, 30, 60)

    def on_data(self, data) -> 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 put options from the contracts which is ATM in the option chain.
        puts = [i for i in chain if i.strike == atm_strike and i.right == OptionRight.PUT]
        if len(puts) == 0: return

        # sorted the optionchain by expiration date
        expiries = sorted([x.expiry for x in puts], 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_put_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)
        
    def on_end_of_algorithm(self) -> None:
        for symbol, sec in self.securities.items():
            self.log(f"{symbol} :: {sec.price}")

Other Examples

For more examples, see the following algorithms: