Out of the money strikes for option chains

Hi Justin,

Please provide the contracts for which days are missing and how you are selecting the contracts. Furthermore, if you could attach code that demonstrates missing contracts, that would be greatly appreciated.

Best,
Shile Wen 

Hello Shile,

I've attached the backtest with code. 

Hi Justin,

I was unable to reproduce the issue, and I was able to pull deep OTM options. If you could elaborate what the issue you were facing was, that would be greatly appreciated.

Best,
Shile Wen 

Maybe the misunderstanding is about what "75% of ATM strikes" means.

Let's take an example : SPY options, with the underlying (SPY) around 320.

Trading OTM puts that "75% or more" away from the underlying would mean trying to trade puts with a strike of a maximum of 80 (320 * (1-0.75) = 80)

That is extremely deep OTM strikes, and only a few maturites (like December 2020) have strikes that are as deeply OTM.

Moreover, it is rather rare to try trading such options contracts.

Justin Gerard, maybe you wanted to trade strikes that are ATM or slightly OTM, using the current DELTA of options. In that case, that would mean selecting options with a DELTA of 0.75 (or minus 0.75, depending if it is a call or a put) and NOT selecting options with their STRIKES values, which would mean selecting options that are not that far away from the current underlying price.

That would be much more usual, at least...


 

Laurent Crouzet and Shile Wen Thank you for the responses. I am grateful for this community. 

My confusion is coming from the fact that I am printing the strikes to the logs and for the backtest attached below, the logs will show something like:

This tells me that there is a lower bound on the stikes available. 

Shile: Were you able to check the logs and confirm the strikes available? 

Justin Gerard, a few remarks:

1. As you work with options, you should ask for the raw "Data Normalization mode"

self.equity.SetDataNormalizationMode(DataNormalizationMode.Raw)
Agreed, QC does recognize that this mode is needed and automatically change it to Raw mode, but it is a better practice to choose this mode clearly.

2. You still ask for otm strikes that are incredibly out of the market, while you strategy seems to try to trade the ATM strikes (those around + 50% Delta / -50% Delta)

You current lines (42 & 43) are NOT trying to find "At the Money strikes", but strikes that are equal to half of the underlying price, which means strikes which are very low, very far from being ATM:

# determine at-the-money strike
strike = min(strikes, key=lambda x: abs(x-Decimal(0.50)*underlying_price))

Your selection of options contracts that you want to trade should use a filter on the DELTA of options, not on the STRIKES of options.