Hello all,

I wanted to share one of the algorithms I have been working on for a while now as I feel it can easily be extended/implemented by other community members. The basic outline of the algorithm is to hedge all of our equity positions (when option data is available) with options of the desired strike and expiration away from the current price and date.

The Universe Selection pulls 25 stocks considered to be stable and the desired put and call options, if available. 

The Alpha Model is a simple reversion to the mean strategy which produces insights on the equities then sends market orders on either the put or call option, depending on the equity's insight. 

Although the performance of the alpha model is weak, the alpha is not the purpose of this algorithm. The purpose of this algorithm is to create a hedging strategy with options using a dynamic universe. 

The reason I think this might be useful is we never have to implement a risk management model that removes options that are expiring too soon or have a strike price( or expiration date) that is no longer desired.  With the dynamic universe, the optimal put and call contracts are always returned. Therefore we do not need to build portfolio construction, or risk management models that take into effect options.

Before I go, I wanted to thank both Jovad Uribe and Alex from QuantConnect for working with me on this project. 


Jason Bohne :)