Trading options near-after EPS reports by Tal Shoham

Tal Shoham INVESTOR

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Hello,

I'm trying to figure out how to backtest trading options near-after EPS reports.

the algo needs to get a list of symbols and dates (the day before the release of the earnings report), to buy ATM options at a specific date, hour and dollar amount and to sell them at the end of the next day (after the earnings report release).

with the help of Alexandre Catarino I got this far (code sample) but the program chooses only one symbol, buys it and then sells it at expiration date.

So how can I:

1) Trade muiltiple symbols from a list with diffrent buying and selling dates.

2) choose the dollar amount of any position.

3) choose the specific dates to sell every position.

import datetime

import matplotlib.pyplot as plt

import pandas as pd



from System import *

from QuantConnect import *

from QuantConnect.Algorithm import *





class BasicTemplateOptionsAlgorithm(QCAlgorithm):



    def Initialize(self):

        self.SetCash(100000)

        

        def init_option(season_tickets, self):

            for ind, row in season_tickets.iterrows():

                option = self.AddOption(row[0], Resolution.Minute)

                option.SetFilter(-3, 0, timedelta(7), timedelta(14))

                self.SetBenchmark(row[0])

                self.Schedule.On(

                    self.DateRules.On(int(row[6]),int(row[5]),int(row[4])),

                    self.TimeRules.At(10,00),

                    self.BuyCall)

                self.option_symbol = option.Symbol

                

        #download EPS csv file from google drive and creating dataframe

        url = "https://www.dropbox.com/s/4vtx2nn6jzty7lc/CND%20EPS%20data.csv?dl=1" 

        file = self.Download(url).split("\n")

        extract_data = [x.split(',') for x in file]

        EPS_data = pd.DataFrame(extract_data)

        EPS_data.columns = EPS_data.iloc[0]

        EPS_data = EPS_data.drop(EPS_data.index[0])

        EPS_data = EPS_data.drop(EPS_data.index[len(EPS_data)-1])

     

        self.symbols = []

        self.SetStartDate(2018, 4, 1)

        self.SetEndDate(2018, 6, 30)

        init_option(EPS_data, self)





    def BuyCall(self):

        if self.Portfolio.Invested: return



        for kvp in self.CurrentSlice.OptionChains:

            if kvp.Key != self.option_symbol: continue

            chain = kvp.Value



            # we sort the contracts to find at the money (ATM) contract with farthest expiration

            contracts = sorted(sorted(sorted(chain, \

                key = lambda x: abs(chain.Underlying.Price - x.Strike)), \

                key = lambda x: x.Expiry, reverse=True), \

                key = lambda x: x.Right)



            # if found, trade it

            if len(contracts) == 0: continue

            symbol = contracts[0].Symbol

            self.MarketOrder(symbol, 1)

            #self.MarketOnCloseOrder(symbol, -1)

Update Backtest

Tal Shoham

Accepted Answer

Update Backtest

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Alexandre Catarino

Hi Tal Shoham ,

I would suggest the implementation of a dictionary keyed by Option Symbol that would save the information from the dropbox file. I cannot access it to write an example, so here is some steps you can take.

class OptionData:

    def __init__(self, symbol):

        self.symbol

        self.dates = list()



    def add_eps(self, year, month, day):

        self.dates.append(datetime(year, month, day)

In Initialize:

self.optionData = dict()



option = self.AddOption(row[0], Resolution.Minute)

symbol = option.Symbol

if symbol not in self.optionData:

    self.optionData[symbol] = OptionData(symbol)

self.optionData[symbol].add_eps(row[6],row[5],row[4])

Then it should only add one schedule event for every day at 10

self.Schedule.On(self.DateRules.EveryDay(),

                 self.TimeRules.At(10,00),

                 self.BuyCall)

Finally, you will loop through self.optionData dictionary and place the order if the current algorithm date is found in OptionData.dates list.

Tal Shoham

130 ,

Hi Alexandre Catarino,

Where should I put the class OptionData?

I tryied to put it befor the main class but I got syntax error.

Alexandre Catarino

Hi Tal Shoham ,

You can add it before or after the main class. There is a typo in line 7, a missing ")" that is causing the error.

Rahul Chowdhury

39.9k ,

Hey Tal,

You can put the OptionData class before or after the BasicTemplateOptionsAlgorithm class. I updated your code with the modifications. However, since the dropbox link has expired, I replaced that section with a sample symbol.

In our BuyCall event, we cycle through the symbols and if today's date is an earnings date for that symbol, we add that symbol to our list of symbols to trade.
For a given dollar amount you want to allocate to an options trade, you can find the number of contracts you can purchase by dividing (dollarAmount/(priceOfContract * 100)). We do this because the contract price represents cost per share and each contract represents control over 100 shares. For this example, we divided the remaining margin evenly between the symbols being traded.
In this example, we close all our options positions the morning after that cycle's earnings have been released.

Tal Shoham INVESTOR

Update Backtest

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