Incorrect implied volatility and delta for some security options pre-2017? by Bradley Crossen

Bradley Crossen INVESTOR

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I have noticed some weird errors for implied volatility and delta on some securities pre-2017. For SPY ,QQQ and IBM, advanced options data like implied volatility and delta seems to calculate correctly in 2017, but before that it seems to give incorrect values. The put IV always seems to be 0, which also seems to mess up the delta calculation. GLD and GOOG however seem to calcuate everything correctly back through at least 2015. The only difference that I can think of between these two groups is that SPY, QQQ and IBM pay dividends while GLD and GOOG do not.

Thoughts?

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Bradley Crossen

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Jing Wu

242.2k ,

Hi Bradley, Can you paste your Log information here? If the implied volatility is just for specific contract it could be zero. It would be better to check all the contracts at the same time for greeks and the IV.

Bradley Crossen

391 ,

Here is the log output from the first 3 months of 2015 (SPY):

2015-01-01 00:00:00 Launching analysis for 6c77f16270c55ee22950be53541efdf7 with LEAN Engine v2.4.0.1.2094 2014-12-29 09:31:00 Algorithm warming up... 2015-01-01 00:00:00 Algorithm finished warming up. 2015-01-12 10:02:00 Put/Call Delta: -0.875281854545776, 0.133186598737162 2015-01-12 10:02:00 Put/Call IV: 0, 0.367504354284584 2015-02-18 10:02:00 Put/Call Delta: -0.861501054327611, 0.14420785204553 2015-02-18 10:02:00 Put/Call IV: 0, 0.349744920510335 2015-03-18 10:02:00 Put/Call Delta: -1.00018230173516, 0.00666483443232885 2015-03-18 10:02:00 Put/Call IV: 0, 0.32939190522855 2015-03-31 20:00:00 Algorithm Id:(6c77f16270c55ee22950be53541efdf7) completed in 128.23 seconds at 667k data points per second. Processing total of 85,540,370 data points.

The program picks the put and call contract which is closest to ATM by choosing the contract closest to -0.5 and 0.5 delta, respectively. So in this instance, all of the contracts are not correcly calculated.

Here is a log output from the first 3 months of 2017 (same program, SPY):

2017-01-01 00:00:00 Launching analysis for bfd23e8aa9cd02419599e76f66a086c9 with LEAN Engine v2.4.0.1.2094 2016-12-27 09:31:00 Algorithm warming up... 2017-01-01 00:00:00 Algorithm finished warming up. 2017-01-09 10:02:00 Put/Call Delta: -0.616915952154026, 0.392607901219933 2017-01-09 10:02:00 Put/Call IV: 0.0595209395216982, 0.16928657108688 2017-02-15 10:02:00 Put/Call Delta: -0.541293423076976, 0.465094299117493 2017-02-15 10:02:00 Put/Call IV: 0.0576402326084872, 0.166816434359085 2017-03-15 10:02:00 Put/Call Delta: -0.547517555529789, 0.459483561447045 2017-03-15 10:02:00 Put/Call IV: 0.0645115228320677, 0.1451368213337 2017-03-31 20:01:00 Algorithm Id:(bfd23e8aa9cd02419599e76f66a086c9) completed in 172.26 seconds at 694k data points per second. Processing total of 119,578,163 data points.

I am not sure if these results are exactly right, but they certainly do seem closer to what they should be.

Here is GLD from 2017.

2017-01-01 00:00:00 Launching analysis for debe3bb604c2acbec786738fa5bd249b with LEAN Engine v2.4.0.1.2094 2016-12-27 09:31:00 Algorithm warming up... 2017-01-01 00:00:00 Algorithm finished warming up. 2017-01-09 10:02:00 Put/Call Delta: -0.456239602936592, 0.454956251793986 2017-01-09 10:02:00 Put/Call IV: 0.133880135856964, 0.135291051418646 2017-02-15 10:02:00 Put/Call Delta: -0.502027029303228, 0.49980110717277 2017-02-15 10:02:00 Put/Call IV: 0.125866364690904, 0.126191891452156 2017-03-15 10:02:00 Put/Call Delta: -0.462660564017818, 0.539575247974283 2017-03-15 10:02:00 Put/Call IV: 0.114299595052734, 0.117092052293294 2017-03-31 20:01:00 Algorithm Id:(debe3bb604c2acbec786738fa5bd249b) completed in 104.91 seconds at 629k data points per second. Processing total of 65,992,062 data points.

This one looks pretty spot on.

Here is the SPY output from 2015, but with the options filter set to 15 wide on both sides and looking for the implied volatility closest to 100%.

2015-01-01 00:00:00 Launching analysis for 92823e0548614b3967a40c529b7c9bc9 with LEAN Engine v2.4.0.1.2094 2014-12-29 09:31:00 Algorithm warming up... 2015-01-01 00:00:00 Algorithm finished warming up. 2015-01-12 10:02:00 Put/Call Delta: -1.00022936151879, 0.338798412536806 2015-01-12 10:02:00 Put/Call IV: 0, 0.455472609048858 2015-02-18 10:02:00 Put/Call Delta: -0.983494843308225, 0.346064181273224 2015-02-18 10:02:00 Put/Call IV: 0, 0.46470457776493 2015-03-18 10:02:00 Put/Call Delta: -1.00001659063879, 0.163285658978417 2015-03-18 10:02:00 Put/Call IV: 0, 0.430703302783538 2015-03-31 20:00:00 Algorithm Id:(92823e0548614b3967a40c529b7c9bc9) completed in 218.27 seconds at 395k data points per second. Processing total of 86,268,601 data points.

Every put contract still has 0 IV.

Derek Melchin

STAFF ,

Hi everyone,

We have recently added a basic template options price model to LEAN which demonstrates the process of testing whether any contracts in the options chain have a delta of 0. It can be viewed on our github repo here.

Best,
Derek

Bradley Crossen INVESTOR

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