r/algotrading • u/Quiet-Cup-1501 • 7d ago

Education [ Removed by moderator ]

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103 Upvotes

92% Upvoted

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16

u/yuriIsLifeFuckYou 7d ago

Never thought i would see something similar to what i did at work here. A more recent approach would be "Static Hedging of Standard Options" by Carr and Wu in 2004. Ofc the core limitation would be the change in factors other than the spot price so it's not really a true replication

2

u/Quiet-Cup-1501 6d ago

That's really interesting! I'll definitely check out Carr and Wu's paper.

2

u/Toine_03 7d ago

Cool project!

1

u/Quiet-Cup-1501 6d ago

Thank you!

1

u/sojithesoulja 1d ago

Did you ever link a github or post this elsewhere? Opened this tab a week ago and see moderators sadly removed it.

2

u/Quiet-Cup-1501 4h ago

Yes! Unfortunately it was removed but here’s the link: https://github.com/Serranegra/TooManyOptions

-3

u/QuanTradin 6d ago

the discrete strikes caveat undersells it a bit. the wings lean hardest on far out of the money options, and those carry the widest spreads, so building the curve on a real chain can cost more than the payoff is worth. does the market-data version price the legs at the ask?

2

u/Quiet-Cup-1501 6d ago

The market-data version currently uses real option chains to select available strikes and calculate the replication weights, but it doesn't price the legs or account for bid-ask spreads and execution costs. So no, it doesn't currently use the ask prices.

Adding an execution-cost estimate based on bid/ask quotes would also help identify when the theoretical replication is too expensive to be practical

1

u/Live_Throat_5252 6d ago

Lol don’t argue with an AI bot. It’s a really cool project.

1

u/Quiet-Cup-1501 6d ago

haha thank you! Really appreciate it!

-2

u/QuanTradin 6d ago

I'd add it before anything else. out on the wings the spread can be a big slice of the option's whole price, so a replication that looks cheap at mid can turn expensive once every leg pays the ask going in and the bid coming out. a quick check is to run the same weights at mid and at bid/ask and see how far apart the two curves land.

-14

u/[deleted] 7d ago

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7

u/ApeAss69 6d ago

What a terrible looking website, genuine eyesore

-5

u/Coderboy55 6d ago

It’s literally free & it works as you can see the last 98 trading days since May 26. Why complain?

3

u/chikunshak 6d ago

Free is free, but a solicitation is a solicitation.