A Call Setup for Option traders

Author: Cone

Creation Date: 4/6/2020 12:32 PM

Wealth Lab » Trading Strategies » A Call Setup for Option traders

Cone

4/6/2020 12:32 PM

Here's a neat little script that simply finds an option strike (next expiration) near a recent peak and requests it's symbol data to visualize. My thought here is that there are 2 weeks left in the April expiry, and if we can get even 50% of the move that started on 23 March, there's good potential in cheap calls right now. What do you think?

For example in the attached image, you can see that the TWLO April 17 100C last traded for $0.23 on Friday, but this option hit $7.50 when TWLO rebounded $30+ to $102 on 26 March. Watch what happens to that call in the next 2 weeks from here! (And there are a lot of these setups out there today.)

CODE:
Please log in to see this code.

TWLO_100C.png

Size:

Color:

For example in the attached image, you can see that the TWLO April 17 100C last traded for $0.23 on Friday, but this option hit $7.50 when TWLO rebounded $30+ to $102 on 26 March.  Watch what happens to that call in the next 2 weeks from here!  (And there are a lot of these setups out there today.)

[code]using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;

namespace WealthLab.Strategies
{
	public class RecentStrike : WealthScript
	{
		StrategyParameter _pct;
		StrategyParameter _log;
		StrategyParameter _add;
		StrategyParameter _nextmonth;
		
		public RecentStrike()
		{
			_pct = CreateParameter("Peak Percent", 10, 5, 25, 5);
			_log = CreateParameter("Log Scale", 1, 0, 1, 1);
			_add = CreateParameter("Add to Strike", 0, -25, 25, 5);
			_nextmonth = CreateParameter("Next Month", 1, 0, 1, 1);
		}
		
		protected override void Execute()
		{
			ClearDebug();
			HideVolume();
			PadBars(1);
			
			int bar = Bars.Count - 1;
			int pb = (int)PeakBar.Value(bar, High, _pct.Value, PeakTroughMode.Percent);

double strike = NearestStrike(High[pb]) + _add.Value;
			string osym = OptSym(Bars, strike);
			Bars obars = GetExternalSymbol(osym, true);

int tb = (int)TroughBar.Value(pb - 1, Low, _pct.Value, PeakTroughMode.Percent);
			DrawLine(PricePane, tb, Low[tb], pb, High[pb], Color.Blue, LineStyle.Dashed, 1);

int lb = (int)LowestBar.Value(bar, Low, bar - pb);
			DrawLine(PricePane, lb, Low[lb], pb, High[pb], Color.Blue, LineStyle.Dashed, 1);
			
			double peak = Peak.Value(bar, High, _pct.Value, PeakTroughMode.Percent);
			DrawLine(PricePane, pb, strike, bar, strike, Color.Black, LineStyle.Dashed, 2);
			DrawLine(PricePane, lb, Low[lb], bar, strike, Color.Blue, LineStyle.Dashed, 1);

// Fill zeroes with values so that Log Scaling will work
			double d = 0;
			int lastzerobar = 1;
			for (int n = Bars.Count - 1; n >= 0; n--)
			{
				d = obars.High[n] > d ? obars.High[n] : d;
				if (obars.Close[n] == 0)
				{
					lastzerobar = n;
					break;
				}
			}
			
			for (int n = 0; n <= lastzerobar; n++)
			{
				obars.Open[n] = d;
				obars.High[n] = d;
				obars.Low[n] = d;
				obars.Close[n] = d;
			}
						
			ChartPane opane = CreatePane(60, true, true);
			opane.LogScale = _log.ValueInt == 1;
			lastzerobar++;
			double lowestprice = Lowest.Value(bar, Low, bar - lastzerobar); 
			SetPaneMinMax(opane, lowestprice, lowestprice);
			PlotSymbol(opane, obars, Color.Green, Color.Red);

DrawLabel(opane, "Last traded: " + obars.Close[bar].ToString("C"));
		}

double NearestStrike(double price, double interval = 5)
		{
			double strike = Math.Round(price / interval);
			strike *= interval;
			return strike; 
		}

// For next expiry 
		string OptSym(Bars bars, double strike, string PC = "C")
		{
			DateTime nextExpiry = NextOptionExpiryDate(bars.Count - 1);

if (_nextmonth.ValueInt == 1)
			{
				nextExpiry = NextOptionExpiryDate(nextExpiry.AddDays(7));
			}

string osym = String.Format("-{0}{1:yyMMdd}{2}{3}", bars.Symbol, nextExpiry, PC, strike);
			return osym;		
		}		
	}
}[/code]

Cone

4/6/2020 8:08 PM

This TWLO call didn't budge much today, but there were certainly other gems out there... like the SQ 60C (+725%) and TTD 200C (+705%).

Script updated above to allow you to choose "Next Month's" expiry too.