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I did make my own option trading algo which is similar to the one in the Git Hub repo (but I used Scala, which gave me additional returns, jk :) ). Return total
by Schweigi 6y ago
I did make my own option trading algo which is similar to the one in the Git Hub repo (but I used Scala, which gave me additional returns, jk :) ). Return totally depends on the delta of the options you write and the option symbols in your basket. Mine could be configured to be between 10-100+%. The higher the return the more volatile.
The idea of using multiple symbols like SPY and TLT is to reduce the tail risk. But in the end there is still tail risk like for example in the crash of 2015. Making the strategy delta neutral with hedging could improve it but I never completed that part.
There is an interesting book with all the math by Euan Sinclair about option writing and how to minimize the risk if you are interested.
- hannofcart 6y agoAnother way to reduce tail risk when selling options is to simply hedge with a protective call/put at a higher or lower strike respectively. Sufficiently far off strikes will have minimal impacts on returns while reducing tail risk.
- scruple 6y agoThese are known as a Poor Man's Covered Calls and Poor Man's Covered Puts.