Options Models
Assignment
Introduction
If you sell an Option in a backtest, an assignment model can simulate an Option exercise order on behalf of the buyer and assign you to complete the requirements of the contract.
Set Models
To set the assignment model of an Option, call the SetOptionAssignmentModelset_option_assignment_model method of the Option object inside a security initializer.
public class BrokerageModelExampleAlgorithm : QCAlgorithm
{
public override void Initialize()
{
// In the Initialize method, set the security initializer to seed initial the prices and models of assets.
SetSecurityInitializer(new MySecurityInitializer(BrokerageModel, new FuncSecuritySeeder(GetLastKnownPrices)));
}
}
public class MySecurityInitializer : BrokerageModelSecurityInitializer
{
public MySecurityInitializer(IBrokerageModel brokerageModel, ISecuritySeeder securitySeeder)
: base(brokerageModel, securitySeeder) {}
public override void Initialize(Security security)
{
// First, call the superclass definition.
// This method sets the reality models of each security using the default reality models of the brokerage model.
base.Initialize(security);
// Next, overwrite the assignment model
if (security.Type == SecurityType.Option) // Option type
{
(security as Option).SetOptionAssignmentModel(new DefaultOptionAssignmentModel());
} }
} class BrokerageModelExampleAlgorithm(QCAlgorithm):
def initialize(self) -> None:
# In the Initialize method, set the security initializer to seed initial the prices and models of assets.
self.set_security_initializer(MySecurityInitializer(self.brokerage_model, FuncSecuritySeeder(self.get_last_known_prices)))
# Outside of the algorithm class
class MySecurityInitializer(BrokerageModelSecurityInitializer):
def __init__(self, brokerage_model: IBrokerageModel, security_seeder: ISecuritySeeder) -> None:
super().__init__(brokerage_model, security_seeder)
def initialize(self, security: Security) -> None:
# First, call the superclass definition.
# This method sets the reality models of each security using the default reality models of the brokerage model.
super().initialize(security)
# Next, overwrite the assignment model
if security.Type == SecurityType.OPTION: # Option type
security.set_option_assignment_model(DefaultOptionAssignmentModel())
Default Behavior
The default Option assignment model is the DefaultOptionAssignmentModel. The DefaultOptionAssignmentModel scans your portfolio every hour. It considers exercising American-style Options if they are within 4 days of their expiration and it considers exercising European-style Options on their day of expiration. If you have sold an Option that's 5% in-the-money and the Option exercise order is profitable after the cost of fees, this model exercises the Option.
To view the implementation of this model, see the LEAN GitHub repository.
Model Structure
Option assignment models should implement the IOptionAssignmentModel interface. Extensions of the IOptionAssignmentModel interface must implement the GetAssignmentget_assignment method, which automatically fires at the top of each hour and returns the Option assignments to generate.
Option assignment models should extend the NullOptionAssignmentModel class. Extensions of the NullOptionAssignmentModel class must implement the GetAssignmentget_assignment method, which automatically fires at the top of each hour and returns the Option assignments to generate.
public class CustomOptionAssignmentModelExampleAlgorithm : QCAlgorithm
{
public override void Initialize()
{
var security = AddOption("SPY");
// Set custom option assignment model for mimicking specific Brokerage most realistic actions
(security as Option).SetOptionAssignmentModel(new MyOptionAssignmentModel());
}
}
// Define the custom Option assignment model outside of the algorithm
public class MyOptionAssignmentModel : IOptionAssignmentModel
{
public OptionAssignmentResult GetAssignment(OptionAssignmentParameters parameters)
{
var option = parameters.Option;
// Check if the contract is ITM
if ((option.Right == OptionRight.Call && option.Underlying.Price > option.StrikePrice) ||
(option.Right == OptionRight.Put && option.Underlying.Price < option.StrikePrice))
{
return new OptionAssignmentResult(option.Holdings.AbsoluteQuantity, "MyTag");
}
return OptionAssignmentResult.Null;
}
} class CustomOptionAssignmentModelExampleAlgorithm(QCAlgorithm):
def initialize(self) -> None:
security = self.add_option("SPY")
# Set custom option assignment model for mimicking specific Brokerage most realistic actions
security.set_option_assignment_model(MyOptionAssignmentModel())
# Define the custom Option assignment model outside of the algorithm
class MyOptionAssignmentModel(NullOptionAssignmentModel):
def get_assignment(self, parameters: OptionAssignmentParameters) -> OptionAssignmentResult:
option = parameters.option
# Check if the contract is ITM
if option.right == OptionRight.CALL and option.underlying.price > option.strike_price
or option.right == OptionRight.PUT and option.underlying.price < option.strike_price:
return OptionAssignmentResult(option.holdings.absolute_quantity, "MyTag")
return OptionAssignmentResult.NULL
For a full example algorithm, see this backtestthis backtest.
The OptionAssignmentParameters object has the following members:
To exercise the Option, return an OptionAssignmentResult with a positive quantity. Otherwise, return OptionAssignmentResult.Null. The OptionAssignmentResult constructor accepts the following arguments:
| Argument | Data Type | Description | Default Value |
|---|---|---|---|
quantity | decimalfloat | The quantity to assign | |
tag | stringstr | The order tag to use |
Examples
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