Buy Straddle With BB Squeeze - Wealth Lab Forum

kamp95

#1

11/27/2019 9:35 PM

Hi, I am new to Wealth-Lab and was wondering if I could get some help with a strategy I am trying to code.

I would like to buy a straddle (buy both a put and a call at the same strike price with the same expiration date) when I see that a Bollinger Band Squeeze has occured. In other words, buy a straddle when the BB width reaches a new low within the past 50 days.

I then want to exit the straddle when the value of my straddle has decreased by more than 5% or if this never happens, sell the straddle within the last 6 hours of trading up to its expiration date (I don't want it to expire since we will have to buy quite a lot of shares of the stock).

I have the following code below started, but am looking for some guidance on how to create the stop loss of 5% on my straddle position.

CODE:
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Any help would be greatly appreciated!!

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Hi, I am new to Wealth-Lab and was wondering if I could get some help with a strategy I am trying to code.

I would like to buy a straddle (buy both a put and a call at the same strike price with the same expiration date) when I see that a Bollinger Band Squeeze has occured. In other words, buy a straddle when the BB width reaches a new low within the past 50 days.

I then want to exit the straddle when the value of my straddle has decreased by more than 5% or if this never happens, sell the straddle within the last 6 hours of trading up to its expiration date (I don't want it to expire since we will have to buy quite a lot of shares of the stock).

I have the following code below started, but am looking for some guidance on how to create the stop loss of 5% on my straddle position.

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

namespace WealthLab.Strategies
{
	public class BBSqueeze : WealthScript
	{
		protected override void Execute()
		{
			
			DataSeries bbL = BBandLower.Series(Close, 20, 2.0);
			DataSeries bbU = BBandUpper.Series(Close, 20, 2.0);
			DataSeries bbW = bbU - bbL;
			
			for(int bar = 50; bar < Bars.Count; bar++)
			{
				if (IsLastPositionActive)
				{
					double Stop = p.EntryPrice * (1 - 5 / 100.0d);
					SellAtStop(bar + 1, p, "Sell Call");
					SellAtStop(bar + 1, p, "Sell Put");
					//code your exit rules here
				}
				else
				{
					if (bbW[bar] < Lowest.Series(bbW, 50))
					{
						Bars contract1 = CreateSyntheticOption(bar, 15, Close[bar], true);
						Bars contract2 = CreateSyntheticOption(bar, 15, Close[bar], false);
						SetContext(contract1);
						BuyAtMarket(bar + 1, "Buy Call");
						RestoreContext();
						SetContext(contract2);
						BuyAtMarket(bar + 1, "Buy Put");
						RestoreContext();
					}
				}
			}
		}
	}
}[/code]

Any help would be greatly appreciated!!

Cone

#2

11/27/2019 11:34 PM

As my last act before Thanksgiving, here's a better start for you. Run this on a daily data.
Later we can add plotting. Also to get that 6-hour constraint, you'll have to use intraday data (probably 30-min bars best).. but you have to walk before you can run!

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As my last act before Thanksgiving, here's a better start for you.  Run this on a daily data.  
Later we can add plotting.  Also to get that 6-hour constraint, you'll have to use intraday data (probably 30-min bars best).. but you have to walk before you can run!

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

namespace WealthLab.Strategies
{
	public class BBSqueeze : WealthScript
	{
		protected override void Execute()
		{
			DataSeries bbL = BBandLower.Series(Close, 20, 2.0);
			DataSeries bbU = BBandUpper.Series(Close, 20, 2.0);
			DataSeries bbW = bbU - bbL;

// For our purpose create 2 Position variables to easily keep track of the put and call
			Position pCall = null;
			Position pPut = null;
			
			for (int bar = 50; bar < Bars.Count; bar++)
			{
				// Manage multiple positions (so you shouldn't just use LastPosition logic)
				if (ActivePositions.Count > 0)
				{
					// if options expire tomorrow, sell at open
					if (Date[bar].AddDays(1) >= NextOptionExpiryDate(bar))
						ExitAtMarket(bar + 1, Position.AllPositions, "Expiry");
					else
					{
						// Calculate the combined profit percent 
						double profitPctCombo = pCall.NetProfitAsOfBarPercent(bar) + pPut.NetProfitAsOfBarPercent(bar);

if (profitPctCombo < -5)
							ExitAtMarket(bar + 1, Position.AllPositions);
					}
				}
				else
				{
					// compare the current bar's bbW to the Lowest of the *previous* bar
					if (bbW[bar] < Lowest.Series(bbW, 50)[bar - 1])  
					{
						double strike = GetClosestStrike(Close[bar]);
						Bars callbars = CreateSyntheticOption(bar, 15, 20, true);
						Bars putbars = CreateSyntheticOption(bar, 15,  20, false);
						
						SetContext(callbars);
						pCall = BuyAtMarket(bar + 1, "Buy Call");
						RestoreContext();
						
						SetContext(putbars);
						pPut = BuyAtMarket(bar + 1, "Buy Put");
						RestoreContext();
					}
				}
			}
		}

// You can use this to get strikes in steps of 5, for example
		private double GetClosestStrike(double price, int step = 5)
		{
			return Math.Round(price / step) * step;
		}
		
	}
}[/code]

superticker

#3

11/28/2019 3:10 AM

Slightly off topic, but I would checkout the interesting YouTube video on the WL Squeeze indicator page http://www2.wealth-lab.com/WL5Wiki/Squeeze.ashx?HL=squeeze. Now that video link there talks about doing the squeeze with long and short trades, not options. But you can certainly adapt the code to options.

Also, the ActiveTrader 2009-02 Double-band squeeze system strategy https://www.wealth-lab.com/Strategies/Forum/ActiveTrader-2009-02-The-double-band-squeeze-system-234 gives a Wealth-Lab strategy employing the WL Squeeze indicator. Again, it's employing long and short trades, but you can adapt it for options. Employing the WL Squeeze indicator may save some coding.

kamp95

#4

12/2/2019 7:19 PM

@superticker, I tried loading in the squeeze command but WLP didnt recognize it. Any reason why? I think this is a community created command?

@Cone, Thank you so much! The code worked, and I see some good results. I will try to reduce the time frame and look at each individual trade to see if the code works as intended.

kamp95

#5

12/2/2019 8:30 PM

@Cone, I have a follow up question regarding exiting the positions. I cannot find very good documentation from the WLP quick reference on the position command, so I was hoping you could help.
We enter a position with the command BuyAtMarket.
If we want to exit that SPECIFIC position, how do i do so?

Eugene

#6

12/2/2019 8:31 PM

QUOTE:
@superticker, I tried loading in the squeeze command but WLP didnt recognize it. Any reason why? I think this is a community created command?

Right. If you install Community Indicators and restart WLP it will get recognized.

QUOTE:
If we want to exit that SPECIFIC position, how do i do so?

Since your new question is a general usage and/or off topic please ask it in a new thread. To keep our forum well maintained and organized let's have this thread focused on the very specific subject which is "buying straddles with BB Squeeze'. tia.

kamp95

#7

12/2/2019 9:56 PM

I've modified the code slightly to allow for me to add in another position and not close it.
The code compiles and runs, but the "Performance" tab shows that I am losing quite a bit of money now when compared to the previous code where I simply closed all positions.
Do you know why this would be?

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I've modified the code slightly to allow for me to add in another position and not close it.
The code compiles and runs, but the "Performance" tab shows that I am losing quite a bit of money now when compared to the previous code where I simply closed all positions.
Do you know why this would be?

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

namespace WealthLab.Strategies
{
	public class BBSqueeze : WealthScript
	{
		protected override void Execute()
		{
			DataSeries bbL = BBandLower.Series(Close, 20, 2.0);
			DataSeries bbU = BBandUpper.Series(Close, 20, 2.0);
			DataSeries bbW = bbU - bbL;

// For our purpose create 2 Position variables to easily keep track of the put and call
			Position pCall = null;
			Position pPut = null;

for (int bar = 50; bar < Bars.Count; bar++)
			{
				// Manage multiple positions (so you shouldn't just use LastPosition logic)
				if (ActivePositions.Count > 0)
				{
					// if options expire tomorrow, sell at open
					if (Date[bar].AddDays(1) >= NextOptionExpiryDate(bar))
						ExitAtMarket(bar + 1, Position.AllPositions, "Expire");
					else
					{
						// Calculate the combined profit percent 
						double profitPctCombo = pCall.NetProfitAsOfBarPercent(bar) + pPut.NetProfitAsOfBarPercent(bar);

if (profitPctCombo < -5)
							ExitAtMarket(bar + 1, pCall, "Exit Call");
							ExitAtMarket(bar + 1, pPut, "Exit Put");
					}
				}
				else
				{
					// compare the current bar's bbW to the Lowest of the *previous* bar
					if (bbW[bar] < Lowest.Series(bbW, 50)[bar - 1])
					{
						double strike = GetClosestStrike(Close[bar]);
						Bars callbars = CreateSyntheticOption(bar, 15, 20, true);
						Bars putbars = CreateSyntheticOption(bar, 15, 20, false);

SetContext(callbars);
						pCall = BuyAtMarket(bar + 1, "Buy Call");
						RestoreContext();

SetContext(putbars);
						pPut = BuyAtMarket(bar + 1, "Buy Put");
						RestoreContext();
					}
				}
			}
		}

// You can use this to get strikes in steps of 5, for example
		private double GetClosestStrike(double price, int step = 5)
		{
			return Math.Round(price / step) * step;
		}

}
}[/code]