A caution about expiring monthly expirations in AlgoNet

Alan

New Member
#1
I posted this in the backtesting Skype to which many of you might belong. However, just in case you are not in that Skype, I am reposting here:

A potential caution to AlgoNet users:

I am noticing that when AlgoNet determines the option values for expiring monthly options, it appears to be using the EOD Friday pricing.

Since the monthly expiration closes on Thursday of expiration week but the price determination is via the Friday settlement price, using the EOD Friday price can potentially change the results dramatically.

In one of my backtests I was allowing trades to go into expiration. AlgoNet showed one of the trades as -16% based on a Friday EOD SPX price of 1392. The Friday Set price as checked on the CBOE website was at 1310. The trade would have been a full 10% winner.

I happened to be manually analyzing losers, so in this case it helped out. It is quite possible that some of my winners would have been losers.
 
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