RiskOptima Options Analysis Suite

 
Analyze IV, Simulate Greeks, and Backtest Strategies — All in One File

Built for speed. Tuned for precision. Engineered to empower.

This post lays out a fully functional options trading toolkit that combines:

  • 🔍 Volatility screening

  • 🧠 Greek simulation

  • 📊 Straddle backtesting

We use live market data (via yfinance), visualize critical metrics, and ensure all functions are contained in a single script — just the way traders like us operate.


🔍 Option Moneyness: Know Where You Stand

Before trading any option, you must understand where its strike sits relative to the current market price — this is called moneyness.

✔️ Calls

  • In the Money (ITM): Strike < Spot — already profitable if exercised

  • At the Money (ATM): Strike ≈ Spot — highest gamma, most responsive

  • Out of the Money (OTM): Strike > Spot — cheap, speculative

✔️ Puts

  • In the Money: Strike > Spot — pays off below market

  • At the Money: Strike ≈ Spot — greatest extrinsic value

  • Out of the Money: Strike < Spot — directional downside exposure

Use this mental map before entering any directional or volatility trade.


📈 1. Implied Volatility Screener

❓ What It Does:

This function retrieves ATM IV across expirations and compares it to historical volatility over a 30-day period. It helps answer:

“Are options overpriced or underpriced right now?”

✅ Use It For:

  • Deciding whether to buy or sell premium

  • Structuring spreads vs naked options

  • Understanding term structure and skew

📊 Example Output:

🔍 Observations:

  • Near-term IV (May 2025) is significantly elevated — likely due to earnings or macro event.

  • IV sharply declines across the curve, bottoming around 42% in late 2025/early 2026.

  • The red dashed line = 30-day realized volatility (HV), sitting around 56.7% → options are currently rich.

This chart helps identify when to sell vol (e.g. short strangles or spreads) or buy vol (e.g. long straddles).



🧪 2. Straddle Earnings Backtester

❓ What It Does:

Backtests a simple earnings strategy:

  • Enter straddle 5 days before earnings

  • Exit 1 day after earnings

  • Estimate payoff using an assumed 5% straddle cost

✅ Use It For:

  • Gauging whether vol crush post-earnings destroys value

  • Validating if the move justifies option premium

  • Spotting overpriced earnings setups

📊 Example Output:

Summary Stats (AMZN):



🔍 Observations:

  • All 8 backtested trades were net losses — the moves were too small to justify the premium.

  • Volatility is overpriced before earnings, and the subsequent move doesn’t compensate.

  • Actionable Insight: Favor selling premium (like iron condors or ratio spreads) before AMZN earnings.


🧠 3. Greeks Simulator

❓ What It Does:

Calculates and visualizes option sensitivities across strikes for a specific expiry and volatility.

✅ Use It For:

  • Understanding where gamma is peaking

  • Managing theta decay

  • Spotting vega exposure for volatility plays

📊 Example Output:



🔍 Observations:

  • Gamma and Vega peak at-the-money (Strike ≈ 193) — confirming the standard shape

  • Theta is most negative at ATM — time decay is fastest here

  • Delta slope confirms call curve — higher strikes have lower delta

This simulator lets you align trades with your expectations on price, volatility, and time decay.


🎯 When to Use Calls vs Puts (Quick Guide)



Market View
StrategyExample
Bullish breakoutBuy CallLong 195C if AMZN ≈ 192
Bearish catalystBuy PutLong 190P for downside
Big move (unknown dir)Buy Straddle195C + 195P
Mild bullish moveBull Call Spread195C / short 200C
Mild bearish moveBear Put Spread195P / short 190P

🧰 Toolkit Functions (Copy-Paste Ready)

  • RiskOptima.implied_volatility_screener(symbol='AMZN')

  • RiskOptima.straddle_backtester(symbol='AMZN', window_before=5, window_after=1)

  • RiskOptima.greeks_simulator(S=192.82, T_days=20, sigma=0.35, option_type='call')

All wrapped in a single file. Minimal dependencies. Maximum insight.


🚀 What’s Next

  • Add run_all() orchestrator for batch testing

  • Plug into riskoptima portfolio overlays

  • Build a Streamlit dashboard (optional)

  • Add edge detection: where historical P&L exceeds breakeven

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