May I object?
SPX is European style, is cash settled, no early exercise.
SPY is American style, physically settled, exercise possible anytime if option ITM.
Or am I wrong?
Kind regards
16-Delta is the "sweet spot" for short put?
- Thread starter turkeyneck
- Start date
May I object?
SPX is European style, is cash settled, no early exercise.
SPY is American style, physically settled, exercise possible anytime if option ITM.
Or am I wrong?
Kind regards
Not sure what you are trying to grasp??
when running an option backtest and looking at what strike to run the test,they typically decide between percent of spot and Delta...
In this discussion,we are talking 45 day options,so ATM foward isnt an issue..
As you know,I could choose to run a backtest on "100 percent of spot PUT"(ATM) or a 50 Delta put,also ATM...Same strike,different approaches.
In the example from the paper,16 delta puts are supposedly the optimal delta to sell. FWIW,I do not agree. Keep in mind a 16 delta put will have a slightly different strike price depending on IV.Play with IV and see foryourself..IOW,the percent OTM will vary..
If that doesnt sit well with you,you can fix the strike by selecting a "percent of spot" strike that approximates a 16 delta put ..Look at the SPY options expiring on 7/28...the 16 delta option is the 417 strike..Its also the 95% of spot put..(417/438 ).To be clear,change the Voland you will see how Delta changes. Its up to you to decide what methodology you prefer....
As for SPX v SPY,there are nuances,but the backtests should be almost identical.
I do notice that you tend to overcomplicate things
when running an option backtest and looking at what strike to run the test,they typically decide between percent of spot and Delta...
In this discussion,we are talking 45 day options,so ATM foward isnt an issue..
As you know,I could choose to run a backtest on "100 percent of spot PUT"(ATM) or a 50 Delta put,also ATM...Same strike,different approaches.
In the example from the paper,16 delta puts are supposedly the optimal delta to sell. FWIW,I do not agree. Keep in mind a 16 delta put will have a slightly different strike price depending on IV.Play with IV and see foryourself..IOW,the percent OTM will vary..
If that doesnt sit well with you,you can fix the strike by selecting a "percent of spot" strike that approximates a 16 delta put ..Look at the SPY options expiring on 7/28...the 16 delta option is the 417 strike..Its also the 95% of spot put..(417/438 ).To be clear,change the Voland you will see how Delta changes. Its up to you to decide what methodology you prefer....
As for SPX v SPY,there are nuances,but the backtests should be almost identical.
I do notice that you tend to overcomplicate things
@taowave, are you aware of the fact that the OP & original source are talking of ShortPut, not LongPut?
But is your example of S=438 K=417 ExpDate=7/28 not for a LongPut? Since it's bearish, whereas ShortPut is bullish... So, you got the strike at the wrong side of the spot, IMO.
I still don't understand how you compute 16 delta to get the strike 417.
IMO it should be 438 - 16 / 0.5 = 406 for a LongPut
and 438 + 16 / 0.5 = 470 for a ShortPut
Assuming delta=0.5 for current spot, ie. for ATM, which usually holds if no dividends involved.
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of course I am aware of that 
Ive backtested it and know its wrong or optimized
If someone calls you and says make a 2 sided market on the 95% spot put expiring in 43 days,you have no idea if its a long or short put until I hit the bid or lift the offer. What I am showing you is dealer convention for quoting,and/or Orats inputs..
Go thru the numbers,for some odd reason you are a bit confused..
Ive backtested it and know its wrong or optimized If someone calls you and says make a 2 sided market on the 95% spot put expiring in 43 days,you have no idea if its a long or short put until I hit the bid or lift the offer. What I am showing you is dealer convention for quoting,and/or Orats inputs..
Go thru the numbers,for some odd reason you are a bit confused..
You could be right, verifying... Someone has it really badly wrong... Ie. the original author and source at https://www.projectfinance.com/spx-vs-spy/ has many bugs in its text regarding the differences between SPX and SPY.
Official information from this link confirms what you said:
https://www.cboe.com/tradable_products/sp_500/spx_options/
Btw, there is also a "mini" available named XSP, which is similarly 1/10 of SPX, much like SPY:
https://www.cboe.com/tradable_products/sp_500/mini_spx_options/
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Dude,you are lost on a simple
concept.
Take the strike price and divide it by price. That's one method.
Or
Use Delta of the option as input to run backtest.The author couldn't have been clearer..
Whats the issue , other than the obvious?
@taowave, I've enough of BS talkers, pls pls don't let you be one of those...[/QUOTE]
concept.
Take the strike price and divide it by price. That's one method.
Or
Use Delta of the option as input to run backtest.The author couldn't have been clearer..
Whats the issue , other than the obvious?
@taowave, I've enough of BS talkers, pls pls don't let you be one of those...
[/QUOTE]Dude, you lack some basic math skills, I would sayDude,you are lost on a simple
concept.
Take the strike price and divide it by price. That's one method.
Or
Use Delta of the option as input to run backtest.The author couldn't have been clearer..
Whats the issue , other than the obvious?
@taowave, I've enough of BS talkers, pls pls don't let you be one of those...
Taking strike and dividing by price gives in your case 417/438 = 0.95. How is this at all related to 16 delta?
Exactly..In this example the 95 percent spot put = 16 Delta..
Why is this so hard for you? You can program,but you can't equate the 95 percent spot put to its Delta??
put
Why is this so hard for you? You can program,but you can't equate the 95 percent spot put to its Delta??
put
Dude, you lack some basic math skills, I would say
Taking strike and dividing by price gives in your case 417/438 = 0.95. How is this at all related to 16 delta?
Come on, what has 0.95 (or 95%) to do with 16 delta? Just show us the math.
Or is this maybe an unwritten ancient "convention" you maybe was taught by someone?