This is followed by another two digits indicating the Expiration year. The following two digits represent the Expiration day, which is the 3rd Friday of every month for AM settled monthly options. Additionally, the letter indicating expiration month is lower case for any strikes > 999.999. The following letter represents the Expiration month code, which is different for put and call options and can be found in 'RULES2'. The first three letters indicate the name of the asset, which can be a maximum of 5 for other assets according to 'RULES7'. Options on other indices and equities follow the same structure. Section 1: Reconstruct expired option RICsīelow, we illustrate the Refinitiv Identification Code (RIC) structure of an expired option on the NASDAQ 100 index (NDX) as an underlying. Finally, Section 3 implements a short iron condor strategy on NDX and visualizes the backtesting results. Also, we use a function to offset the transactions before expiration based on VIX movements. Section 2 introduces functions to conduct option transactions to build iron condor legs and report the strategy outcome. In Section 1, we build and present a function for expired option RIC reconstruction and validation. The article follows the following structure. The impact of other corporate events, such as stock dividends, right offering, M&A is not considerd and tested in the scope of this article. Additionally, we considered also the impact of stock split event on the underlying price and strike price, and adjusted the prices accordingly. Except for NDX, we tested the functions on SPX, IBM, TWTR and AAPL, which produced the required results to be used for backtesting of options on these assets. The current backtesting model is not at the production level and is not tested on a wide range of underlying assets. It should be noted that options with different underlying assets have different liquidity, and one may not get data for specific OTM ranges for some underlying assets. In this article, we test and visualize the profit/loss of the short Iron Condor strategy with 10% and 20% Out of Money (OTM) sizes for NDX however one can use the functions and codes of this article to backtest other OPRA exchange-traded indices (such as SPX) and equities (such as IBM, TWTR) at the same time specifying OTM sizes other than 10/20%. Functions reconstruct and validate AM settlement options expiring on the 3rd Friday of each month. Further, in this article, RIC reconstruction and validation functions are presented they can be used for options on OPRA exchange-traded indices and stocks. To get historical data on options, one will need to reconstruct options Refinitiv Identification Codes (RIC) following the logic of RIC construction rules and the rules specified by the exchange where the option is traded. The challenge is that one cannot directly access expired options through a single API call. The important part of this article is the reconstruction of expired options, which used to be a challenge reported many times in the Developer community Q&A forum. Step 6 (optional): you can modify the spot price, number of days before expiry or implied volatility through the controls below the chart to simulate the P&L of your strategy and see how it fares under new market conditions (note that this is theoretical though).This article explores how short iron condor strategies can be backtested. Step 4: enter the option price and quantity for each leg (quantity is expected to be the same for each leg) all options have to expire at the same date) Step 3: enter the maturity in days of the strategy (i.e. Step 2: enter the underlying asset price and risk free rate Step 1: select your option strategy type ('Long Iron Condor', or 'Short Iron Condor') it lets you see how your options' price varies alongside a price and/or It also gives you tools to estimate the profit and loss (P&L) of your strategy before maturity by giving you control over price, This calculator displays the payoff of your strategy at maturity depending on the underlying asset price. An iron condor is similar to a strangle, except that both upside and downside are limited. On the contrary, a short iron condor would be suitable if you expect low volatility and a stable price. This strategy is suitable when you expect a big move up or down, beyond the lowest and highest strike prices of your options. Iron Condor Profit Calculator A long iron condor strategy has four legs and consists in selling one OTM put, buying one OTM put with a higher strike price, buying one ITM call and selling one ITM call with a higher strike price.
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