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I am new to quantconnect and trying to figure out how to back test options. One of the requirements that I have is to check for options contracts 1 standard deviation away from ATM contract. Another is to check for option contracts that have a probability of 30% of being in the money. Usually I will be looking for a monthly contracts.
I have not found any API for determining the contracts that are one standard deviation away from the ATM contract. I'm assuming I will have to figure this out myself. But I'm not sure how to do this. I have looked around on the discussion forum but could not find anything. I was assuming that this would be a common enough requirement and that is why I was hoping that this may already be resolved within the quantconnect programming code.
Similarly, I was hoping that there would be an ability to find the option contract that have a probability of 30% of being in the money. Do I have to calculate these myself.
I did see a class OptionPriceModel but there is no documentation for that. I was hoping to leverage that code but cannot find it.
Please advise
Jack Simonson
Hi KG,
One option for filtering options contracts that are +/- 1 standard deviation away from an ATM option is to use an EMA universe selection algorithm. This enables you to apply the SD filter to a moving average indicator of an ATM's price. Sorting for options with a 30% probability of being in the money will have to be done as a customized function or calculation after selecting the options universe. The documentation for OptionPriceModel is now available and gives a variety of methods for options pricing to choose from.
KG LLP
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