CreateSyntheticOption and Raw Profit Mode
Author: cmtn
Creation Date: 11/18/2017 9:22 PM
profile picture

cmtn

#1
I'm testing options with CreateSyntheticOption. I am using raw profit mode of $1,000.

I see that it bought 8* $1.66 per share = $1,328.

Why is this so much more than $1,000? For example 6*1.66 = 996. It seems like it should trade 6 shares (contracts) instead of 8. Per help: "The number of shares is determined by dividing the position's basis price into the selected amount.". Am I doing something wrong?

This caught my eye because I have losses exceeding $1,000.

Also, it appears that if I use position size of 1 share/contract, it is one option share. If I change it to 100, it looks like it is trading 10 contracts instead. Is this right?

Thanks
profile picture

Eugene

#2
QUOTE:
Why is this so much more than $1,000? For example 6*1.66 = 996. It seems like it should trade 6 shares (contracts) instead of 8. Per help: "The number of shares is determined by dividing the position's basis price into the selected amount.". Am I doing something wrong?

Was there a gap up on the day it bought at $1.66? If the close price of the preceding trading session was more like $1.25 then this explains what you see. $1.25 * 800 = $10K. The basis price would be ~$1.25.

QUOTE:
Also, it appears that if I use position size of 1 share/contract, it is one option share. If I change it to 100, it looks like it is trading 10 contracts instead. Is this right?

I can't see how it looks like on your end but if you follow my suggestion from the support ticket and provide more details to illustrate (Strategy code, symbol you apply it to, settings) we might be able to reproduce and understand. Thanks.
profile picture

sizezero

#3
I dont understand the position sizing at all!
When I use RP Mode like 5000€/trade..once it is buying 30 contracts for 0,86, which is 25,8?
Next day 49*0,36 = 17.64, then 64 for 0,26 (in sum 16.64)..and so on..not even close to 5000€ or anything.

Same with normal portfolio simulation mode (like Percent of Equity)...and its wih all securities the same.
I am missing here sth or is it a bug?
profile picture

Eugene

#4
QUOTE:
I dont understand the position sizing at all!

When backtesting synthetic options, each 1 "share" in the Quantity column represents a full lot i.e. 100 shares. With this in mind the results will make perfect sense. Quoting Investopedia:
QUOTE:
The stock option contract is between two consenting parties, and the options normally represent 100 shares of an underlying stock.


P.S. You should really stick with PNG as JPG is truly suboptimal for screenshots. If you haven't seen this famous comics, it's perfect time :)

JPEG or PNG – Which Image Format Offers Better Quality?
profile picture

sizezero

#5
Ok, thanks for you quick answer.
So when I want to trade really 15% of my cash, I have to select 1500% as Percent of Equity instead of 15%?
profile picture

Eugene

#6
Rather the exact opposite of it. Or you might want to configure the Symbol Info Manager.