2
$\begingroup$

I have a strategy based only on option instruments and I am trying to measure its performance to optimize some parameters. But how does one measure the performance of such strategies?

For Sharpe ratio calculation how do we calculate the return rates? For example, on one day the strategy is to buy and sell some options and its zero cost up front, the strategy made some PnL. What should be the return rate for this period?

Improve this question
$\endgroup$

1 Answer 1

Reset to default
1
$\begingroup$

It's not a zero cost as you need to pay the initial margin and should have some extra cash in case you go below maintenance margin. You need some cash to trade, pick a sensible amount for an initial figure and measure against that.

Improve this answer
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.

Not the answer you're looking for? Browse other questions tagged or ask your own question.