binomialOptions2018

Project motivation

The idea for this project can be sourced from a 20 second clip in the movie The Big Short. Which, for legal reasons I can’t embed here so here is a link

https://youtu.be/Qo1OSqBQYmk?t=218

The clip explains a very simplified version of the investment strategy for a firm known in the movie as Brownfield Fund known as Cornwall Capital in real life. Betting on unlikely events using cheap options. The list of stocks came from a zacks.com screen. It had broad requirements aimed at any stock with a liquid enough option chain.

As for the strategy, I was hoping to find out what events the market thinks will never happen based off of the abnormal option pricing. Abnormal in this case just means that its expecting a move that doesn’t match its past performance since volatility data is what the algorithm has to go off of.

Technical notes

The code itself began as messy at best and later became somewhat understandable. It was written before I knew the best practices with respect to variable naming & program organization. The bulk of the data was initially sourced from Barchart’s API before they required a subscription service. Then it was converted to TDAmeritrade’s API in 2022. Stock volatility & dividend info is from yahoo finance

Example report (ran 11/27/22)