The option-strategies tag has no wiki summary.
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5answers
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Skew arbitrage: How can you realize the skewness of the underlying?
It's not clear to me how to realize skewness. In other words, how do you implement skew arbitrage? There seems to be no well-known recipe like in volatility arbitrage.
Volatility arbitrage (or ...
12
votes
2answers
1k views
statistical arbitrage option overlay strategies / volatility trading
Here's an interesting trading puzzle that I would love to get the community's input on.
Let's say there exists an alpha signal that does a good job of sorting equities expected excess returns over ...
11
votes
2answers
478 views
Transparent quant products with real track record
A real track record is better than backtesting! I am looking for
products, funds, certificates, indices etc. that are based on
quantitative trading strategies where the
strategies and performance ...
11
votes
3answers
2k views
Papers about backtesting option trading strategies
I am looking for all kinds of research concerning option trading strategies. With that I mean papers that publish results on different option trading strategies properly backtested with real-world ...
11
votes
2answers
3k views
Are there any good tools for back testing options strategies?
There are all kinds of tools for backtesting linear instruments (like stocks or stock indices). It is a completely different story when it comes to option strategies. Most of the tools used are ...
11
votes
2answers
409 views
Can you replicate an option on an arbitrary basket of stocks?
Since a market index is nothing more than a basket of stocks, you can create your own index by putting together stocks of your choice. The only difference is that you can trade options on major ...
11
votes
2answers
417 views
What benchmark/index to use for backtesting a portfolio of stock options?
What benchmark should I use for backtesting a model for when I should buy an option of a particular stock? For equities, one could say their portfolio outperformed the S&P 500. I would like to ...
10
votes
5answers
751 views
Is it possible to use a series of option prices to predict the most likely path of an asset?
I've always wondered about this.
If you have a series of options, with the expires spaced let's say one week between them, and you search for each expiration date the option with the smallest ...
9
votes
2answers
1k views
How can I learn about the quantitative aspects of market making in illiquid single stock options?
I would like to learn more about the possible ways of doing quantitative research regarding option market making. In particular, while the mainstream index option market may be very liquid, the ...
8
votes
1answer
823 views
What is the average Sharpe ratio of volatility arbitrage funds?
Where can I get data on performance metrics for volatility arbitrage funds? I am trying to compare the Sharpe ratio of my strategy to those of the major players.
7
votes
2answers
1k views
Are there comprehensive analyses of theta decay in weekly options?
Are there comprehensive analyses of how much theta a weekly options loses in a day, per day?
I know what the shape of theta decay looks like, in theory, where the decay towards zero happens more ...
7
votes
2answers
646 views
How to calculate the most realistic historical option prices with additional publicly available parameters
This is a follow up question of this one.
My aim is to create the most realistic historical option prices possible with publicly available data. I want to do this for backtesting purposes.
The ...
4
votes
1answer
236 views
Call option arbitrage opportunity
I am having trouble wrapping my head around some text provided to us by our lecturer (unfortunately he is currently unavailable). If we let $c$ be the price of a European call option, $S_0$ the ...
4
votes
1answer
495 views
How to hedge a bull call spread
I am trying to make a theoretical hedge to a bull call spread. (buy out the money call, sell further out the money call)
What I have now is almost effective but there is one possible 80% loss ...
4
votes
1answer
154 views
Options: Vertical LEAPS
I am developing an algorithm and it needs to know what to do in certain market conditions
It takes on a Vertical Bull Call Debit Spread on LEAPS that are 12+ months out in the future. This means that ...
3
votes
0answers
81 views
Analysis of Unbalanced Covered Calls
Hello I am doing an analysis on covered calls with and extra amount of naked calls. Ignore the symbol and current macroeconomic events.
I couldn't find any reference to this strategy (unbalanced is ...
2
votes
1answer
140 views
Greeks and Option Premium
If a linear sum of options is constructed such that the premium payout is zero, then does it mean that resultant greeks of the cumulated options positions will be nearly zero. For simplicity, lets ...
2
votes
1answer
84 views
Hedging differences between equity and index options?
Suppose we hedge an index option using futures on that index. How would the hedging strategy be different if the underlying could be traded directly (from a risk point of view)?
2
votes
1answer
172 views
In a covered call strategy, should I hold the call or sell/roll if the delta becomes too small?
I am tweaking a covered call algorithm. The short leg consists of out of the money call options. The goal is to collect the tim premium, but an equally favorable circumstance is when the call ...
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vote
0answers
142 views
Call options portfolio: what would the underlyings' moments to be maximized?
Let you have only three underlyings, like SPY, TLT and GLD, and you want to buy $n_{1}$ Call options on SPY, $n_{2}$ Call options on TLT and $n_{3}$ Call options on GLD... with a limited budget, that ...
0
votes
0answers
95 views
Make assumption about future stock price: is the option with best return fairly clear? [closed]
If a security has price X now, and one makes the assumption it will have a greater price Y later, is the option (or option spread) that will provide the best return fairly clear, including the ...
-1
votes
2answers
183 views
What is the Benefit of holding a short option?
i am new to corporate finance and ask myself why a investor is interested in being short on a Option? The only he can win is a premium but he can loose much more. I understand with being a short I can ...
-4
votes
1answer
209 views
What is the net premium of a bull spread option? [closed]
Suppose we have the following information for the index $S$:
current price = $ \$1000$
risk free rate $4 \%$ convertible semiannualy
What is the net premium to create a $ \$ 1000- \$ 1050$ bull ...
-6
votes
3answers
488 views
True or False? An option's price will always be greater than or equal to its intrinsic value
Since if the option's price is lower than its intrinsic value (eg. strike price - current stock price for puts), then an arbitrage opportunity arises from buying the option at bargain and then ...
