Settling Expiring Options in Backtests at the Final Close

Summary

This brief options-forum exchange asks how an options strategy should handle a position that reaches expiration during a backtest. A respondent says to calculate the profit or loss using the closing price on the final trading day. The answer offers a simple convention for marking an expiring position in a historical simulation.

The discussion does not explain whether the closing price refers to the option or its underlying, how exercise or assignment is represented, or how settlement differences across option contracts are handled. It also gives no worked example or comparison with alternative expiry rules. Readers should therefore treat the reply as a concise forum suggestion rather than a complete specification for options backtesting; implementing expiry handling requires contract-specific settlement details.

Key ideas

• The exchange concerns how to account for options that expire during a backtest.
• The suggested approach is to calculate profit or loss using the final trading day’s close.
• The reply does not clarify which instrument’s closing price is intended.
• Exercise, assignment, and contract-specific settlement rules are not discussed.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.