Option Backtesting Framework v2 by JP B

JP B

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Alright, I've tried to fix some further bugs:

In-the-money and out-the-money is now relative to option type

Fixed some logic in the maturity declarations

Fixed the way options are referred to

The way we can refer to options is now (when using "MONTHLY" options):

Order("SPY.CALL.1.0", 80*100);

which means: Buy 80 CALL contracts with the first in-the-money strike price with the maturity in this month.

Or, an example for "WEEKLY" options:

Order("SPY.PUT.-2.2", 80*100);

which means: Buy 80 PUT contracts with the second out-the-money strike price with the maturity in two weeks.

Another example:

Order("SPY.CALL.-2.0", 80*100);

which means: Buy 80 CALL contracts with the second out-the-money strike price with the maturity in this week.

As I'm currently doing my master's (Quant Finance of course), I won't be able to spend any more time on this framework. I hope it can suffice as a help (or inspiration) to the formal framework that Jared&Team are developing.

Mind you, however, that I'm calculating the theoretical price of European options. Calculating the price of American options is a bit more difficult. Maybe QuantConnect can reach out to iVolatility, which have a very good calculator for both option types. Maybe they are willing to share their code? (Even CBOE uses their calculator)

Anyway, I wish you guys good luck with the formal framework!

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JP B

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JP B

21.9k ,

As you can see from the backtest, I'm still having troubles with the 0$ value error. This is probably because I'm creating my own assets and the logic is quite complex. Maybe someone is able to solve this. Anyway, this is all I can help with the new option backtesting framework.

I propose that we don't just put options in QuantConnect, but that we built a complete option backtesting framework including all greeks and other option properties. QuantConnect is already superior, but if we can fully backtest options including all option bells and whistles, it will be unrivaled! :)

Jared Broad

Epic algorithm share! Very cool! Insane to see a full Black Scholes implementation in an option data type! :)

JP B

21.9k ,

@Jared Thank you for the compliment! The framework is still far from finished and I noticed that it still contains some bugs when I clone the backtest from this page. Nevertheless, I hope it can be of use for the development of the formal option-backtesting framework :)

And, as I said before, it might be a good idea to contact iVolatility to see if you can, maybe, use their code (even if in encrypted API version, like a DLL) to calculate the theoretical prices of options more easily. Would of course be awesome to be able to base option strategy on statistics such as implied volatility and the greeks!

JP B

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