Scaling OptionMetrics Strikes and Using Delta to Filter Moneyness
Summary
The document explains how to interpret OptionMetrics strike data when the stored strike appears much larger than the underlying index level. The stated convention is that the strike is scaled by 1,000, so divide the recorded value by 1,000 before comparing it with spot to assess moneyness. This resolves the apparent mismatch in units and supports filtering contracts by strike relative to the underlying price.
For a delta-based selection, the response suggests consulting the VOLATILITY_SURFACE table, which provides delta alongside strike. Delta can serve as a measure for locating options with a desired moneyness, after which nearby contracts can be selected. The response cautions that strikes in this table are interpolated, so they may not correspond exactly to listed contracts. It gives practical data-handling guidance rather than a full specification of call and put delta conventions or a complete method for selecting a precise percentage in or out of the money.
Key ideas
- OptionMetrics strike values in the described data are scaled by 1,000 and should be rescaled before comparison with spot.
- Moneyness can be assessed by comparing the corrected strike with the underlying price.
- The VOLATILITY_SURFACE table provides delta and strike values that can help filter options by moneyness.
- Surface strikes are interpolated, so they may differ from listed contract strikes.
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Full text
# Question on OptionMetrics: "Strike Price times 1000" differs too much from Index price # Question on OptionMetrics: "Strike Price times 1000" differs too much from Index price I have a question regarding the strike price that is given on OptionMetrics. My goal is to primarily retrieve options prices of a specific maturity with strike prices that are 20% in-the-money, at-the-money and 20% out-the-money. In order to do so I need to use the direct relationship between the strike price $K$ and the spot price $S_t$. The exact definition as given by Investopedia.com is: > For a call option, when the option's strike price is below the market price of the underlying asset, an option is In-The-Money. When I use the date from OptionMetrics I find that my strike price is given in the form '257000' for instance, hence with header 'Strike price times 1000'. However the index price (market price) at that particular point in time is about 9580. This large difference holds for all observations. How do I then calculate the amount that the option is in- or out-of-the money? I am therefore wondering whether someone has experience with working with OptionMetrics and more specific on filtrating options that are say 20% in-the-money. ## Answer by Eli (score 1) https://quant.stackexchange.com/a/4090 The strike price provided by OptionMetrics is simply strike x 1000, so in order to calculate moneyness of the option you have to divide the strike by 1000 and then proceed in a standard manner. In terms of filtering the moneyness of the option, there are few options. The easiest is using VOLATILITY_SURFACE table in the OptionMetrics database. Amount of the moneyness is measured by the delta of an option. Delta of an option is between 0% to 100%. VOLATILITY_SURFACE provides delta column along with strike for that moneyness. Given this strike you can filter the options around that strike. Just remember that these are interpolated strikes in that table.
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