Automated Option Trading: Create, Optimize, and Test Automated Trading Systems
The first and only book of its kind, Automated Options Trading describes a comprehensive, step-by-step process for creating automated options trading systems. Using the authors’ techniques, sophisticated traders can create powerful frameworks for the consistent, disciplined realization of well-defined, formalized, and carefully-tested trading strategies based on their specific requirements. Unlike other books on automated trading, this book focuses specifically on the unique requirements of options, reflecting philosophy, logic, quantitative tools, and valuation procedures that are completely different from those used in conventional automated trading algorithms. Every facet of the authors’ approach is optimized for options, including strategy development and optimization; capital allocation; risk management; performance measurement; back-testing and walk-forward analysis; and trade execution. The authors’ system reflects a continuous process of valuation, structuring and long-term management of investment portfolios (not just individual instruments), introducing systematic approaches for handling portfolios containing option combinations related to different underlying assets. With these techniques, it is finally possible to effectively automate options trading at the portfolio level. This book will be an indispensable resource for serious options traders working individually, in hedge funds, or in other institutions.
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algorithm applied approach asymmetry average basis calculated call-to-put ratio calm market capital allocation method capital allocation system characteristics chart in Figure coefﬁcient concave function convex function convolution criterion threshold values days to options deﬁned delta-neutral portfolios delta-neutrality boundaries developer distribution evaluation example expected proﬁt ﬁnancial ﬁrst ﬁxed forecast global maximum historical volatility HV estimation period implied volatility index delta inﬂuence loss probability market-neutral Nelder-Mead method node number of days objective function value optimal area optimal solution optimization space option combinations option portfolios option price option strategies option trading option trading strategies options expiration parameter values partially directional strategy payoff function portfolio creation portfolio value portfolios consisting portfolios constructed portfolios created probability density function put options reﬂect relationship risk indicators selected short combinations short strangles signiﬁcant signiﬁcantly simplex speciﬁc standard deviation strike price strikes range threshold and strikes trading strategy underlying asset price variability variants weight function