am looking to backtest a strategy of systemic put buying on an equity index (e.g SPX Index) so say a strategy of buying 1Y 90% SPX Puts rolled 1 day prior to expiry.

As opposed to only calculating the intrinsic value of the option prior to rolling (ITM/OTM/ATM), I would like to calculate the monthly MtM of the strategy so I can get exposure to the vega/delta effects.

Am able to calculate the price of the option at the end of each month via BSM as a function of Spot,Time,Vol while keeping the initial strike constant but am having issues with how to best calculate the Monthly Returns of the option since a simple % chng from the option price is going to have especially outsized % p/ls which isnt entirely representative.

Any help would be appreciated! Thanks.

  • $\begingroup$ What do you think is the difference between MtM and the market price? Also, why compute the price when it's quoted? $\endgroup$
    – AKdemy
    Jul 24 at 5:40
  • $\begingroup$ MtM perhaps wasnt the best term to be used in my question, my apologies if it made it confusing. I think my question revolves around how i should better account for the monthly p/l % for the option strategy since I am able to calculate the rough price of the option at the end of each month $\endgroup$
    – nzc
    Jul 24 at 6:11


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.