Option Spread - Delta and Strike Data correct?

Hi all,

I have an account also with CMLViz its a site for running backtests on option strategies. Lately, I wanted to see if I could make any money using bull call credit spread (or bull put credit spread) on moves of QQQ or whatever ticker.

But I can't get the quantconnect data version of the call contract to give the same results. Essentially for 1 year back, do sell 70 delta call and buy an 80 delta call on a given equity (QQQ in this example) and make money.

The CMLViz shows a profit % much higher. And the strikes are a little off despite the delta calculation. Not knowing what I am missing here. Performance should be 350% with 5 contracts.

I have attached only a subset of the above trades...

Date Description Size Symbol Expiration Strike Type Trade Price Profit/Loss Stock Price Adjusted Stock Price

6-Jan-2020   Open TechnicalOpen:Short Calls   -10   QQQ   Jan17`20   212.5   Call   $4.31      $215.56   $214.03
6-Jan-2020   Open TechnicalOpen:Long Calls   10   QQQ   Jan17`20   210.5   Call   $5.94      $215.56   $214.03
17-Jan-2020   Close DaysToExpiration:Short Calls   10   QQQ   Jan17`20   212.5   Call   $10.84   -$6530   $223.38   $221.8
17-Jan-2020   Close DaysToExpiration:Long Calls   -10   QQQ   Jan17`20   210.5   Call   $12.91   $6970   $223.38   $221.8

21-Jan-2020   Open TechnicalOpen:Short Calls   -10   QQQ   Jan31`20   220   Call   $4.56      $223.28   $221.7
21-Jan-2020   Open TechnicalOpen:Long Calls   10   QQQ   Jan31`20   217.5   Call   $6.63      $223.28   $221.7
31-Jan-2020   Close DaysToExpiration:Short Calls   10   QQQ   Jan31`20   220   Call   $0.02   $4540   $219.07   $217.52
31-Jan-2020   Close DaysToExpiration:Long Calls   -10   QQQ   Jan31`20   217.5   Call   $1.74   -$4890   $219.07   $217.52

3-Feb-2020   Open TechnicalOpen:Short Calls   -10   QQQ   Feb14`20   218   Call   $6.2      $222.38   $220.8
3-Feb-2020   Open TechnicalOpen:Long Calls   10   QQQ   Feb14`20   214.5   Call   $9.05      $222.38   $220.8
14-Feb-2020   Close DaysToExpiration:Short Calls   10   QQQ   Feb14`20   218   Call   $16.48   -$10280   $234.64   $232.98
14-Feb-2020   Close DaysToExpiration:Long Calls   -10   QQQ   Feb14`20   214.5   Call   $19.99   $10940   $234.64   $232.98

18-Feb-2020   Open TechnicalOpen:Short Calls   -10   QQQ   Feb28`20   231   Call   $5.1      $234.73   $233.07
18-Feb-2020   Open TechnicalOpen:Long Calls   10   QQQ   Feb28`20   229   Call   $6.72      $234.73   $233.07
28-Feb-2020   Close DaysToExpiration:Short Calls   10   QQQ   Feb28`20   231   Call      $5100   $205.8   $204.34
28-Feb-2020   Close DaysToExpiration:Long Calls   -10   QQQ   Feb28`20   229   Call      -$6720   $205.8   $204.34

23-Apr-2020   Open TechnicalOpen:Short Calls   -10   QQQ   May1`20   204   Call   $9.25      $210.52   $209.47
23-Apr-2020   Open TechnicalOpen:Long Calls   10   QQQ   May1`20   199   Call   $13.18      $210.52   $209.47
1-May-2020   Close DaysToExpiration:Short Calls   10   QQQ   May1`20   204   Call   $8.3   $950   $212.74   $211.68
1-May-2020   Close DaysToExpiration:Long Calls   -10   QQQ   May1`20   199   Call   $13.32   $140   $212.74   $211.68

4-May-2020   Open TechnicalOpen:Short Calls   -10   QQQ   May15`20   208   Call   $9.86      $215.22   $214.15
4-May-2020   Open TechnicalOpen:Long Calls   10   QQQ   May15`20   204   Call   $13.02      $215.22   $214.15
15-May-2020   Close DaysToExpiration:Short Calls   10   QQQ   May15`20   208   Call   $15.13   -$5270   $223.27   $222.16
15-May-2020   Close DaysToExpiration:Long Calls   -10   QQQ   May15`20   204   Call   $19.13   $6110   $223.27   $222.16

18-May-2020   Open TechnicalOpen:Short Calls   -10   QQQ   May29`20   222   Call   $7.9      $227.43   $226.3
18-May-2020   Open TechnicalOpen:Long Calls   10   QQQ   May29`20   217   Call   $11.96      $227.43   $226.3
29-May-2020   Close DaysToExpiration:Short Calls   10   QQQ   May29`20   222   Call   $11.44   -$3540   $233.36   $232.2
29-May-2020   Close DaysToExpiration:Long Calls   -10   QQQ   May29`20   217   Call   $16.36   $4400   $233.36   $232.2

1-Jun-2020   Open TechnicalOpen:Short Calls   -10   QQQ   Jun12`20   228   Call   $8.4      $234.06   $232.9
1-Jun-2020   Open TechnicalOpen:Long Calls   10   QQQ   Jun12`20   223   Call   $12.53      $234.06   $232.9
12-Jun-2020   Close DaysToExpiration:Short Calls   10   QQQ   Jun12`20   228   Call   $8.33   $70   $235.88   $234.71
12-Jun-2020   Close DaysToExpiration:Long Calls   -10   QQQ   Jun12`20   223   Call   $13.27   $740   $235.88   $234.71

15-Jun-2020   Open TechnicalOpen:Short Calls   -10   QQQ   Jun26`20   232   Call   $9.16      $238.75   $237.56
15-Jun-2020   Open TechnicalOpen:Long Calls   10   QQQ   Jun26`20   227.5   Call   $12.66      $238.75   $237.56
26-Jun-2020   Close DaysToExpiration:Short Calls   10   QQQ   Jun26`20   232   Call   $8.09   $1070   $240.22   $239.44
26-Jun-2020   Close DaysToExpiration:Long Calls   -10   QQQ   Jun26`20   227.5   Call   $12.68   $20   $240.22   $239.44

29-Jun-2020   Open TechnicalOpen:Short Calls   -10   QQQ   Jul10`20   237   Call   $8.33      $242.84   $242.05
29-Jun-2020   Open TechnicalOpen:Long Calls   10   QQQ   Jul10`20   232.5   Call   $11.79      $242.84   $242.05
10-Jul-2020   Close DaysToExpiration:Short Calls   10   QQQ   Jul10`20   237   Call   $27.2   -$18870   $263.97   $263.11
10-Jul-2020   Close DaysToExpiration:Long Calls   -10   QQQ   Jul10`20   232.5   Call   $31.68   $19890   $263.97   $263.11

13-Jul-2020   Open TechnicalOpen:Short Calls   -10   QQQ   Jul24`20   250   Call   $12.14      $258.54   $257.7
13-Jul-2020   Open TechnicalOpen:Long Calls   10   QQQ   Jul24`20   243   Call   $17.72      $258.54   $257.7
24-Jul-2020   Close DaysToExpiration:Short Calls   10   QQQ   Jul24`20   250   Call   $5.44   $6700   $255.56   $254.73
24-Jul-2020   Close DaysToExpiration:Long Calls   -10   QQQ   Jul24`20   243   Call   $12.36   -$5360   $255.56   $254.73

27-Jul-2020   Open TechnicalOpen:Short Calls   -10   QQQ   Aug7`20   253   Call   $9.98      $260.12   $259.27
27-Jul-2020   Open TechnicalOpen:Long Calls   10   QQQ   Aug7`20   248   Call   $13.91      $260.12   $259.27
7-Aug-2020   Close DaysToExpiration:Short Calls   10   QQQ   Aug7`20   253   Call   $18.42   -$8440   $271.47   $270.59
7-Aug-2020   Close DaysToExpiration:Long Calls   -10   QQQ   Aug7`20   248   Call   $23.42   $9510   $271.47   $270.59

And now here is the QuantCOnnect version I coded from scratch... does terrible and results not same... as I said... something is off:

TLDR: Trust QuantConnect, imo.

Hi Goldie Yalamanchi ,

I'm ramping up with QC, but I skimmed the code and took a look at this in CMLViz.

At first I thought the discrepancy might be because we are using intraday data on QC (with minute resolution), but with CMLViz we only have a single snapshot of the option chain for the each day (daily resolution)

So I backtested the strategy on OptionStack (OS), which also has daily resolution, and my OS results are closer to the results we are seeing in QuantConnect. In my image below, you will notice that the strategy does okay and then hits a big drop in August. Just like our QC strategy.

There could be a few reasons why CMLViz does not have this drop, but it’s hard to tell what they are doing behind the scenes.

It’s my first time using CMLViz, and the first thing i noticed is that there isn’t much granularity on how to pick strikes. Our vertical consists of a 70 delta and 80 delta, but there are times in an option chain you might not have exact deltas that match. For example You my have 69 delta and 71 delta. but not exact ’70’. In this scenario, what strike does CMLViz pick? Do they just skip the trade? We don’t know, and that can make all the difference.

In options backtesting platforms like OptionStack and ORATs (they both also only have daily option chain data), you specify a range. For example, in OptionStack, for the 70 delta, i put in a range of 69 - 70 delta (instead of just 70), and I specified that if there are multiple matches within this range, then select the best strike based on max return.

In QC, we have even much more control / granularity where we have minute resolution for our option chain, and at different times of day our option chain can look very different, but we can pick exactly what we want, with custom logic.

My advice would be to trust QC, where you have more data, and more control. However, if you really want your QC and CMLViz backtests to match, try to find out what exactly CMLViz is doing under the hood, so you can replicate it in QC.

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.

I can help troubleshoot. What is the specific behaviour / strategy you Backtested in CML?

You mentioned: "For 1 year back, do sell 70 delta call and buy an 80 delta call on a given equity (QQQ in this example) and make money"

But more details would help. Can you share a link to the CML backtest itself? I backtest on optionstack and ORATs, but I am going to be signing up for CML as well.

.ekz. INVESTOR

ThePrinters.io | January 2021

Upvote

Also, I think you meant Bullish Call debit spread. A call credit spread would be bearish.

Goldie Yalamanchi INVESTOR

January 2021

Yes sorry I meant a bullish debit spread (call).

Sure here is the link...

https://pro.trademachine.com//index.php?share_key=20210105234627_c0sMcX0x3dcs0YJh

Yes I think there maybe issue with the strikes on CMLViz. Anyways I was just doing a one month membership with them... but if their data is no good whats the point. I am inclined to think that based on optionstack gave you the same results as QC.

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