FX Option Basket Strategy

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Introduction

The purpose of this notebook is to how to create a systematic strategy involving a basket of FX option strategies. ## Environment This section will import relevant internal and external libraries, as well as setting up the platform environment.

import sigtech.framework as sig

from uuid import uuid4
import datetime as dtm
import pandas as pd
import seaborn as sns

sns.set(rc={'figure.figsize': (18, 6)})

env = sig.init(env_date=dtm.date(2024, 2, 22))

Universe

The universe of the strategy consists of a number rolling RollingStraddleOptionStrategy option strategies.

def create_straddles(ccy: str) -> sig.RollingStraddleOptionStrategy:
    # Get the option group
    fx_option_group = sig.FXOTCOptionsGroup.get_group(ccy)

    # Create Straddle object
    s = sig.RollingStraddleOptionStrategy(
        currency=fx_option_group.over,
        start_date=dtm.date(2017, 1, 6),
        group_name=fx_option_group.name,
        strike_type='Delta',
        strike=0.5,
        maturity='3M',
        end_date=dtm.date(2019, 1, 20),
        rolling_frequencies=['1M', ],
        target_quantity=-50.0,
        target_type='Vega',
        ticker=f'{ccy} SHORT ROLLING STRADDLE {str(uuid4())[:4]}',
        total_return=False,
    )
    return s.name, s.history()

ccys = ['EURUSD', 'GBPUSD']

strategy_dictionary = {
   create_straddles(ccy)[0]: create_straddles(ccy)[1]
   for ccy in ccys
}

Plot the created RollingStraddleOptionStrategy objects.

pd.concat(strategy_dictionary, axis=1).dropna().plot();

Strategy

All of the rolling Straddle selling strategies will be combined in a single basket. In this section we will define how the different Straddle strategies will form the overall strategy - this include the weighting and allocation between the sub-strategies.

# define constituent weights
constituent_names = strategy_dictionary.keys()

# The sub-strategies will be equally weighted in the strategy
constituent_weights = [1.0 / len(constituent_names)] * len(constituent_names)

Portfolio

In this section we will create a BasketStrategy of all the different sub-strategies.

basket = sig.BasketStrategy(
    currency='USD',
    start_date=dtm.date(2017, 1, 6),
    end_date=dtm.date(2019, 1, 20),
    constituent_names=constituent_names,
    weights=constituent_weights,
    rebalance_frequency='EOM',
    total_return=False,
)

Performance

sig.PerformanceReport(basket, cash=sig.CashIndex.from_currency('USD')).report()