nikolas-joyce
commented
6 years ago Task the bigger task is to establish how many required options are unnecessary trades. In others words how often are we selling (exiting) options below 2-5 ticks and then reentering these OTM options. I think we could probably reduce the commissions costs in the model by 50-70% is we correctly accounted for these low risk options .
Take for example this CL risk reversal which is used to hedge a long options strategy.
compare it to the hedge version of this risk reversal below.
the passive version does +$25000 the active version does -$27000. In all likelihood we could hold the passive continuously and only remove the short put when we exit the futures and end with a greatly reduces commission cost. it is unlikely this maneuver would cause the passive version to drop from +25000 to -27000.
the theme is do the open selling for premium collection but recycle the OTM options wings so as to reduce the overall cost.
alexveden
we believe on average we do not have to exit every long OTM option that the model calls for and for this reason we may be over estimating the total commission cost in the event the model exits then reenters options which are OTM. we cannot seem to extract a trade count to be able to compare the number of trades executed to model required. Task : Calculate the Model required trade stat. We need a count of how many trades the model is requiring so we can see how many fewer we do in practice.
Task : Confirm that cost are now included in V2 hedge legs. Task: Constuct a notebook that lets the user view the number of options exited below some defined tick level. say the total trade count over a window is 2000 trades and 600 are exits of options below 3 ticks we can conclude the true trade count is closer to 1400...