Algorithmic Options Strategies

This two-day workshop explores algorithmic trading strategies on options and volatility instruments. Delegates will learn how to construct and backtest a range of effective algo strategies, including intraday events-driven trading, gamma scalping, dispersion trading, and cross-sectional mean reversion trading. Strategies on volatility products as well as volatility prediction techniques will also be discussed.

This course will be conducted using MATLAB, though expertise in this package is not required.

05 - 06 October 2022


2 Days


London, UK – Tower Hotel, London E1


Ernest Chan

Course Fee:

£1990 + VAT


Overview of options and volatilities

  • What risks do you want to hedge?
  • Delta, gamma, theta, and vega
  • Straddles and strangles
  • Volatility: realized and implied. Can we predict them?

Tutorial to MATLAB

  • Quick survey of syntax: arithmetrics, arrays, functions
  • Useful toolboxes
  • The pros and cons of using MATLAB as a backtesting platform vis-à-vis R and Python

Event-driven trading

  • Can we benefit from buying volatility ahead of economic announcements?
  • A tale of two events
  • Backtesting intraday straddles and strangles strategies with high frequency data

Gamma scalping

  • The theoretical appeal of gamma scalping
  • Is gamma scalping long or short volatility?
  • Backtesting gamma scalping on crude oil futures and options

Dispersion trading

  • An analogy with index arbitrage
  • The risk profile of dispersion trading
  • Various implementation alternatives
  • Backtesting dispersion trading on the SPX: the curse of dimensionality

Cross-sectional mean reversion of implied volatility

  • Time series vs cross-sectional mean reversion
  • Does realized volatility mean-revert? Does implied volatility?
  • Backtesting a portfolio of stock options
  • Why is the return so high? Leverage of an option position
  • Risks of a cross-sectional mean reversion strategy on options

Trading volatility without options

  • Trading VX using predictions of VX return
  • Using GARCH to predict volatility
  • The counter-intuitive way of trading XIV using predictions of SPY volatility

General pitfalls and difficulties of backtesting and implementing algo options strategies