Options strategy: how to buy a call prior to expiration?

Author: CarmaAdvisory

Creation Date: 5/31/2017 6:50 AM

Wealth Lab » WealthScript (.NET) » Options strategy: how to buy a call prior to expiration?

CarmaAdvisory

5/31/2017 6:50 AM

Hi everybody, I would need help for coding an option strategy. I would want to create a strategy that, when a specific condition is satisfied, buy a call with at least 7 day to expiration with a strike price that is x% below the underlying previous close.

I tried using CreateSyntheticOption with poor results...

Thanks

Eugene

5/31/2017 7:45 AM

Please raise questions related to WealthSignals under that category. This is a WealthScript question.

Have you thoroughly reviewed search results for "option" that might be like these threads (containing a lot of quality code examples):

WL 6.9: Synthetic Options Contract Reference
Backtesting historic predictions of optionable stocks
How to code "nearest term ATM call option"?

Then, how do your results look like or what presents difficulty?

CarmaAdvisory

5/31/2017 8:45 AM

Thank you Eugene, actually very high quality code example even if not easy for my poor coding skills...

Trying to create a call option with at least 7 days to exp and with a strike price 3% below previos close:

CODE:
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I get the error message CS1502: The best overloaded method match for WealthLab.WealthScript.CreateSyntheticOption(int,int,int,bool) has some invalid arguments

I realized that the third argument (0.97*Close[bar]) is the problem. In addition could you please explain me the meaning of the first argument (DateTime startDate)?

Thank you

Eugene

5/31/2017 9:16 AM

QUOTE:
I realized that the third argument (0.97*Close[bar]) is the problem.

No, it's more than this argument. As you could see in the QuickRef, CreateSyntheticOption can be called like this:

CODE:
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You're trying to mix both worlds which won't work out. There is no way to have both atLeastXDaysTilExpiration and strikePrice because it's not programmed to be used like that.

For backtesting, the correct way would be to use some extra methods like DateTimeToBar and NextOptionExpiryDate and some functions available only in Community Components:

CODE:
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So for backtesting this should suffice:

CODE:
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Problem is, you cannot use this for live trading because NextOptionExpiryDate returns -1 for dates beyond the right edge. If you're willing to drop the "strike price 3% below previous close" requirement, your task becomes very simple -- just use the overloaded call:

CODE:
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Size:

Color:

[quote]I realized that the third argument (0.97*Close[bar]) is the problem.[/quote]
No, it's more than this argument. As you could see in the QuickRef, [i]CreateSyntheticOption[/i] can be called like this:
[code]Bars CreateSyntheticOption(DateTime startDate, DateTime expiryDate, double strikePrice, bool isCallOption);
Bars CreateSyntheticOption(int asOfBar, int atLeastXDaysTilExpiration, int daysToPlotBeforeCreation, bool isCallOption); [/code]
You're trying to mix both worlds which won't work out. There is no way to have both [i]atLeastXDaysTilExpiration[/i] and [i]strikePrice[/i] because it's not programmed to be used like that.

For backtesting, the correct way would be to use some extra methods like [b]DateTimeToBar[/b] and [b]NextOptionExpiryDate[/b] and some functions available only in Community Components:
[code]public static DateTime SubTradingDays(this WealthScript obj, int bar, int days)[/code]

So for backtesting this should suffice:
[code]using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;

namespace WealthLab.Strategies
{
	public class MyStrategy : WealthScript
	{
		protected override void Execute()
		{
			for(int bar = 1; bar < Bars.Count; bar++)
			{
				var endDate = NextOptionExpiryDate(bar);
				var endDateBar = DateTimeToBar(endDate,true);
				
				if( endDateBar > -1 )
				{
					endDate = this.SubTradingDays(endDateBar,7);					
					var startDate = this.SubTradingDays(DateTimeToBar(endDate,true),120);
					var strikePrice =  0.97*Close[bar];
					
					Bars contract = CreateSyntheticOption(startDate, endDate, strikePrice, true);
				}
			}
		}
	}
}[/code]

Problem is, you cannot use this for live trading because [i]NextOptionExpiryDate[/i] returns -1 for dates beyond the right edge. If you're willing to drop the "strike price 3% below previous close" requirement, your task becomes very simple -- just use the overloaded call:

[code]Bars CreateSyntheticOption(int asOfBar, int atLeastXDaysTilExpiration, int daysToPlotBeforeCreation, bool isCallOption); [/code]