Put Options - Sample algorithm for Finding, Choosing & Trading options by Liz ForPrez

Liz ForPrez

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Hello,

Can anyone suggest a sample algorithm to:

find a few some available Put Options near a target strike price & expiration date (e.g., SPY Mar17'17 Puts with 5 strike prices near $224.40)
evaluate them and choose one (lowest bid/ask spread or lowest implied IV or highest return for a forecasted underlying price target)
place order & buy it

Thanks in advance. Either C# or python would be great.

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Liz ForPrez

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Ray Bohac

See that and the examples below. Hopefully this helps you as a start for your own algorithm. After you have started please feel free to share it and ak questions for more help. Also note that the IV is not currently loading however you can do the other things you mentioned like Bid/Ask spread and could also add your own modeling as your forecasted price target

Take a look at this templace for some inspiration https://github.com/QuantConnect/Lean/blob/master/Algorithm.CSharp/BasicTemplateOptionTradesAlgorithm.cs

For strike selection you can do some interesting things. such as

option.SetFilter(universe => from symbol in universe

  .IncludeWeeklys()

  .Expiration(TimeSpan.FromDays(1), TimeSpan.FromDays(7)) // Next 7 days

  where symbol.ID.OptionRight == OptionRight.Put // Put Only

  && ((symbol.ID.StrikePrice - universe.Underlying.Price) / universe.Underlying.Price) <= 0.15m  // within 15% of the underlying

  select symbol);

Heres another snippet I'm using to review Bid/Ask & OI information that might be helpful for you

if (lastSlice.OptionChains.TryGetValue(_optionSymbol, out chain)) // lastSlice is a private variable that I am assigning within the OnData event

            {

                

                // find the first call strike under market price expiring today

                var contracts = (

                    from optionContract in chain

                    

                    .OrderBy(x => Math.Abs(x.UnderlyingLastPrice - x.Strike))  // find nearest options

                    .OrderBy(x => (x.Expiry - _algorithm.Time).TotalDays)

                    where optionContract.Right == OptionRight.Put

                    //where optionContract.Expiry > Time.Date

                    //where optionContract.Strike < chain.Underlying.Price



                    select optionContract

                    ).Take(5).OrderBy(x => x.Strike); // 5 records



foreach (OptionContract _contract in contracts)

                {

                    Decimal pctOtm = ((_contract.Strike - _contract.UnderlyingLastPrice) / _contract.UnderlyingLastPrice);

                    if (pctOtm >= 1) {pctOtm = pctOtm - 1;}

                    



                    Debug(String.Format("Review Option Contract. Strike {0}, ULPrice={1}, Bid={2}, Ask={3} Spread={4}, Expiry={5:d} {6} {7} DTE, {8}% OI={9}",

                    _contract.Strike.ToString("N2"),

                    _contract.UnderlyingLastPrice.ToString("N2"),

                    _contract.BidPrice.ToString("N2"),

                    

                    _contract.AskPrice.ToString("N2"),

                    (_contract.AskPrice - _contract.BidPrice).ToString("N2"),

                    _contract.Expiry,

                    _contract.Expiry.DayOfWeek.ToString(),

                    (_contract.Expiry - _algorithm.Time).TotalDays.ToString("N0"),

                    (pctOtm*100).ToString("N2"),

                    _contract.OpenInterest



                    ));

}

}

Liz ForPrez

39 ,

Thanks for the pointer Ray, this sample seems really helpful (although it will probably take me a while to fully understand C#).

One follow up question...I couldn't see how the template selected Calls (and not Puts). Is there a document which describes OptionChains?

Thanks again,

Liz

Liz ForPrez

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