VIX Put Calendar Spread

Article Strategy library · Author: QuantConnect

Summary

This algorithm maintains a long holding in a volatility-linked exchange-traded product and periodically opens a put calendar spread on VIX options. It selects the strike nearest the index level, filters for options within a stated strike and expiration range, then pairs puts at that strike with the earliest and latest available expirations. The spread is opened as a single strategy order when there is no existing option position.

The algorithm checks the near-term expiry and liquidates invested option legs when that expiry is close, subject to option data being present, before seeking another spread. The source specifies a historical simulation window, minute data, and starting cash, but it includes no reported return or risk statistics. It also does not explain why the spread should be profitable, how the separate volatility-linked holding is managed, or how transaction costs and execution affect results.

Key ideas

The strategy sells a put calendar spread using the same VIX option strike and different expirations.
It selects the strike nearest the current index level and uses the earliest and latest qualifying expirations.
An existing option position prevents the algorithm from opening another spread.
The option legs are liquidated as the nearer expiry approaches when their data is available.
The source gives simulation settings but no performance analysis or trade rationale.

Tags

Options Volatility Derivatives pricing Execution Backtesting

Full text

# IndexOptionPutCalendarSpreadAlgorithm


# IndexOptionPutCalendarSpreadAlgorithm









## Source (Apache-2.0)

```python
# QUANTCONNECT.COM - Democratizing Finance, Empowering Individuals.
# Lean Algorithmic Trading Engine v2.0. Copyright 2014 QuantConnect Corporation.
#
# Licensed under the Apache License, Version 2.0 (the "License");
# you may not use this file except in compliance with the License.
# You may obtain a copy of the License at http://www.apache.org/licenses/LICENSE-2.0
#
# Unless required by applicable law or agreed to in writing, software
# distributed under the License is distributed on an "AS IS" BASIS,
# WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
# See the License for the specific language governing permissions and
# limitations under the License.

from AlgorithmImports import *

class IndexOptionPutCalendarSpreadAlgorithm(QCAlgorithm):

    def initialize(self):
        self.set_start_date(2020, 1, 1)
        self.set_end_date(2023, 1, 1)
        self.set_cash(50000)

        self.vxz = self.add_equity("VXZ", Resolution.MINUTE).symbol

        index = self.add_index("VIX", Resolution.MINUTE).symbol
        option = self.add_index_option(index, "VIXW", Resolution.MINUTE)
        option.set_filter(lambda x: x.strikes(-2, 2).expiration(15, 45))
        
        self.vixw = option.symbol
        self.tickets = []
        self.expiry = datetime.max

    def on_data(self, slice: Slice) -> None:
        if not self.portfolio[self.vxz].invested:
            self.market_order(self.vxz, 100)
        
        index_options_invested = [leg for leg in self.tickets if self.portfolio[leg.symbol].invested]
        # Liquidate if the shorter term option is about to expire
        if self.expiry < self.time + timedelta(2) and all([slice.contains_key(x.symbol) for x in self.tickets]):
            for holding in index_options_invested:
                self.liquidate(holding.symbol)
        # Return if there is any opening index option position
        elif index_options_invested:
            return

        # Get the OptionChain
        chain = slice.option_chains.get(self.vixw)
        if not chain: return

        # Get ATM strike price
        strike = sorted(chain, key = lambda x: abs(x.strike - chain.underlying.value))[0].strike
        
        # Select the ATM put Option contracts and sort by expiration date
        puts = sorted([i for i in chain if i.strike == strike and i.right == OptionRight.PUT], 
                        key=lambda x: x.expiry)
        if len(puts) < 2: return
        self.expiry = puts[0].expiry

        # Sell the put calendar spread
        put_calendar_spread = OptionStrategies.put_calendar_spread(self.vixw, strike, self.expiry, puts[-1].expiry)
        self.tickets = self.sell(put_calendar_spread, 1, asynchronous=True)
```

Shown in full with attribution under the source's licence. Licence: Apache-2.0

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

VIX Put Calendar Spread with Near-Term Expiry Management

Summary

Key ideas

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