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Jun 08, 2018
Category: blogpost

OptionSmile is not an options backtesting platform in a conventional meaning. Its methodology has some key distinctions from the typical way of backtesting:

“Objective” Fair Value

Options Fair Value disregards the views of options markets on how much an option contract should have worth in the past. The only data required to calculate this value is the underlying security returns distribution – as a probability measure. This feature provides for more solid options mispricing estimation when the volatility skew and time structure (vol surface) deviate from their historical averages.

More Historical Data Points

OptionSmile can provide the options valuation based on the time periods when the options market was not liquid, not mature or did not even exist. That gives us more historical data points and more robust estimations of an options strategy efficiency.

Avoidance of a “Sequentiality” Trap

Fair Value calculation refrains from the “sequential” approach used in a standard simple backtesting when each trade opens after the closure of the previous one. Instead, the Fair Value calculation concentrates on the statistical properties of the underlying security and takes into account each day in history and does not accidentally miss any significant market moves, which can be easily “jumped over” by a sequential backtest.

In this post, we take a closer look at these key advantages of the OptionSmile approach.

Read more…

Apr 23, 2018
Category: blogpost

We have started publishing the new regular options market review – Mispricing Snapshots at optionsmile.com/snapshot. In contrast to the already existing Research section (which is renamed to the Backtesting Insights), these notes will be devoted not to the historical analysis of mispricing regimes but to the ad-hoc market disposition; we will compare current market prices of options to their Fair Values.

We will analyze the options mispricing of three most popular equity ETFs:

  • SPY  (S&P 500 Index)
  • QQQ (NASDAQ-100 Index)
  • IWM  (Russell 2000 Index)

Mispricing Snapshots will be published periodically (weekly or bi-weekly) and cover the nearest Friday expirations in the range of 2-5 weeks.

If you are going to trade these option series, check this reports to estimate your expected profit and get an idea whether you have a tailwind or a headwind.

To receive these new reports to your email as soon as they are published, just signup on our website. Everything is absolutely free, as always.

Apr 12, 2018
Category: blogpost

We have adapted our platform to CME Futures and first 10 most optionable futures are now available for analysis:

CL CME Crude Oil Futures
ES CME E-mini S&P 500 Futures
GC CME Gold Futures
GE CME Eurodollar Futures
NG CME Natural Gas (Henry Hub) Futures
NQ CME E-mini NASDAQ-100 Futures
SI CME Silver Futures
ZC CME Corn Futures
ZN CME 10-Year T-Note Futures

 

Read more…

Apr 10, 2018
Category: blogpost

OptionSmiel patent pending

We have filed the Provisional Patent Application to the United States Patent and Trademark Office. From now, the whole scope of the OptionSmile methodology is officially PATENT PENDING.

  • Application number: 62655268
  • Confirmation Number: 7405

This status means we have one year to obtain a non-provisional (regular) patent that will benefit from the filing day of the Provisional Patent Application, i.e. today (April 10, 2018).

Mar 28, 2018
Category: ad hoc

This post was originally published on SeekingAlpha.com.

Summary:

  • Investors often sell call options against their long-term equity portfolios to gain additional income (covered call strategy).
  • The analysis below demonstrates that call options are substantially underpriced in “oversold” markets.
  • In such regimes, short call positions have mathematically expected loss and can be detrimental to the whole portfolio return.
  • It worth suspending call selling is this condition until the market comes to its senses.

Read more…

The information provided on this Website is for informational purposes only and should not be considered as an investment advice. It is not intended to replace consultation with a qualified financial professional. Investing in options involves risk of potential loss exceeding the whole amount of money invested. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.