Systematic Options Trading
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- Live Trading
- Learning Track
- Prerequisites
- Syllabus
- About author
- Testimonials
- Faqs
Live Trading
- List the steps required to trade options systematically
- Perform data quality checks
- Create an options screener to identify the liquid options
- Calculate the probability of profit using the lognormal and empirical distribution
- Explain the limitations of PoP.
- Identify the best strategy based on expected profit
- Analyse the sensitivity of expected profit to the historical data
- Apply technical indicators to determine the exit rule for options trading strategy
- Backtest options trading strategies such as butterfly, iron condor and spread strategies
- Add stop-loss and take profit to your strategy
- Evaluate the backtest performance using metrics such as sharpe ratio and maximum drawdown
- Do’s and don’ts while trading options
- Paper trade and live trade the strategy

Skills Covered
Python
- Pandas
- Numpy
- Mibian
- Matplotlib
- Scipy.stats
Options Strategies
- Butterfly
- Iron Condor
- Bull Call Spread
- Bear Put Spread
- Straddle
Concepts
- Backtesting
- Screener
- Trade Level Analytics
- Data Quality Checks
- Risk Management

learning track 3
This course is a part of the Learning Track: Quantitative Trading in Futures and Options Markets
Course Fees
Full Learning Track
These courses are specially curated to help you with end-to-end learning of the subject.
Course Features
- Community
Faculty Support on Community
- Interactive Coding Exercises
Interactive Coding Practice
- Capstone Project
Capstone Project Using Real Market Data
- Trade & Learn Together
Trade and Learn Together
- Get Certified
Get Certified
Prerequisites for Systematic Options Trading
You should be aware of the basics of options such as call and put options and have knowledge of the payoff from call and put options. It is also assumed that a learner knows how to place an order to buy and sell options and concepts such as strike price, expiry date, and underlying asset. You can check out our course on Options Trading Strategies: Basics if you are not familiar with the options trading system. Knowledge of Python including pandas dataframe, and matplotlib for visualisation, for loops, would be required.
Syllabus
- IntroductionThis course will serve as a step-by-step guide to assist you in trading options systematically and avoiding common mistakes made by traders while trading options. The interactive methods used in this course will assist you in not only understanding the concepts but also answering all questions about systematic options trading. This section explains the course structure as well as the various teaching tools used in the course, such as videos, quizzes, coding exercises, and the capstone project.
Systematic Trading Process
In this section, you’ll be taken through the entire process of automating an options trading strategy. You will learn about the order of the process. You will also be familiarised with each of the activities that have to be carried out for setting up an options trading system.Systematic Trading Process5m 48sData Structure of an Underlying Asset2mOptions Data Structure2mDefine the Purpose of Screener Tool2mEvaluation of Strategy Performance2mIdentify the Correct Order of Process2mOptions Data
Data fetching is one of the most important parts of building a system, and this section covers every aspect of options data. In addition to the sources for fetching options data, it discusses how to organise the data, how to store the data, what tools you can use to store the data, and how to reduce the processing time.Data Vendors10mData Structure5m 31sOption Price Data2mMandatory Fields2mData Derived from Options Data2mNeed for Underlying Data2mNeed for Dividend Data2mData Storage6m 5sGreeks2mStorage of Derived Data2mNonrecurrent Data2mStoring Structured Data2mCSV and Pickle2mPickle File Extension2mRecurrent Calculations10mRecurrent Calculations for Options Data2mAdvantages of Recurrent Calculations2mSourcing US Options Data2mStoring US Options Data5m- Data Pre-ProcessingValidating the data, performing quality checks and cleaning the data is yet another important step in the systematic options trading process that must not be overlooked. In this section, you will be introduced to some techniques that you can use to validate the quality of your options dataset.Data Pre-Processing4m 5sData Pre-Processing Steps2mData Quality Checks2mDiscrepancies in Data2mHow to Use Jupyter Notebook?2m 5sWorking With Pickle File5mData Quality Checks and Data Cleaning10mHow to Use Interactive Exercises?5mCheck for NaN Values5mDrop Missing Values5mIdentify Duplicate Values5mDrop Duplicate Values5mConflicting Expiry Data5mAdditional Reading10m
Creation of an Options Screener
Have you looked at an asset’s option chain and wondered which will be the right option to buy or sell? If yes, then you should definitely go through this section. By using criteria based on liquidity and options interest, you can filter out those options which will not maximise your returns. You can use these, as well as create your own screening criteria to shortlist the options which fit your requirements.Creation of an Options Screener7m 45sNotional Exposure of Option2mPreference of Expiry Date2mSelection of Option on Basis of Open Interest2mSelection of Option on Basis of Bid Ask Prices2mChoice of Option Based on Open Interest Level2mPreference of High Open Interest2mInference of Option Chain2mNotional Exposure Requirement2mOptions Liquidity Screener in Python10mSelection of Expiry with Highest Open Interest5mTest on Options Data and Screener14m- Butterfly Strategy for Options TradingThis section explains one of the most popular options trading strategies, which is the butterfly strategy. It also explains how to select a strategy based on your view of the market and reviews the best-suited strategy for an expected market scenario. In this section, you will learn how to construct a short butterfly strategy and how to implement this strategy using python.Strategy Selection4m 27sStraddle Creation2mCompute Maximum Loss2mSelect the Best Strategy2mCompute Maximum Profit2mButterfly Set-Up5m 51s4 Legs of the Butterfly Strategy2mLong Options2mOTM Options of Short Butterfly2mBreak-Even Point2mMaximum Loss2mMaximum Profit2mSetup the Butterfly Strategy10mATM Strike Price5mCall Options Premium5m
Butterfly Strategy Payoff
In this section, you will first learn how to calculate the payoff for each of the four legs of the butterfly strategy. You will also learn how to arrive at the total payoff from the strategy. This section also includes the computation of net premium, maximum loss and maximum profit. After completing this section you will be able to compute the payoff from the strategy under different scenarios at expiry.Payoff Calculation2mLong Call and Short Call Payoff2mLong Put and Short Put Payoff2mButterfly Strategy Payoff2mThe Long Call Payoff2mPayoff Diagram of the Butterfly Strategy5mThe Short Put Payoff2mCompute the Net Premium5mProbability of Profit
In this section, you will learn about the need for calculating the probability of profit for an option. You will also understand the intuition behind the probability of profit metric. It can be used as both, a screening tool as well as a performance measure.Need of Probability of Profit2m 27sDecision to Trade Using Probability of Profit2mProbability of Profit of Executed Trades2mIntuition of Probability of Profit3m 7sBreakeven of Put Option2mProbability of Profit of Put Option2m- Lognormal DistributionThere are multiple ways to calculate the probability of profit. One way is to use the lognormal distribution. In this section, you will understand the commonalities between the log of prices and lognormal distribution. You will also learn to plot the lognormal distribution of real-world data.Use of Lognormal Distribution to Calculate Probability5m 21sNeed of Lognormal Distribution2mIdentification of Lognormal Distribution2mProperties of Lognormal Distribution2mVolatility of Lognormal Distribution2mThe Lognormal Distribution10mMean of Lognormal Distribution2mCompute the Daily Standard Deviation5mExpected Volatility2mProbability of the Futures Prices5mAdditional Reading10m
Probability of Profit Using Lognormal Distribution
In this section, you will learn here how to compute the probability of profit using the lognormal distribution. Further, you will implement the lognormal distribution on the short and long butterfly strategy and find its probability of profit.Probability of Profit Using Lognormal Distribution2m 21sEssential Component of Lognormal Distribution2mProbability of Profit Using Breakeven Points2mValue of Probability of Profit2mProbability of Profit Using CDF2mProbability of Profit Using the Lognormal Distribution10mCumulative Density Function Value2mProbability in Range of Prices2mCompute the Lognormal Distributed Probability of Profit5mAdditional Reading10mProbability of Profit Using Empirical Distribution
Lognormal distribution uses certain assumptions which may not reflect what is happening in the real world. We can use past data to create a distribution graph which is closer to real-world data. Further, you will learn here how to compute the probability of profit for a short or long butterfly strategy based on an empirical distribution obtained with the underlying asset prices.Probability of Profit Using Empirical Distribution7m 39sAspects Not Incorporated in Lognormal Distribution2mEssential Components for Empirical Distribution2mCalculation of Probability of Price in a Range2mProbability of Profit Using Empirical Distribution2mPercentage Change in Price and Probability of Profit2mProbability of Profit Using the Empirical Distribution10mForecast Prices From Historical Data5mHistogram From Forecasted Prices5mFit a Distribution on the Forecasted Prices5mAdditional Reading10m- Expected ProfitIn this section, you will understand the limitations of using the probability of profit as a standalone metric and how to overcome this by applying the concept of expected profit for trading options.Expected Profit4m 13sTrade or No Trade2mProfitability in Long Run2mBiased Coin2mExpected Profit of Short Butterfly2mExpected Profit Notebook10mCalculate Expected Profit5mTest on Payoff and Probability of Profit14m
- Types of VolatilityVolatility refers to the uncertainty or risk associated with the value of a security. In this section, you will learn about volatility and its various types in the context of options trading.Volatility3m 39sWhat is Volatility?2mImplied Volatility2mHistorical vs Realised Volatility2m
- Implied VolatilityCertain strategies profit from fluctuations in the underlying security. And, for these strategies, forecasting the degree of movement based on market participants' expectations becomes important. You will learn about implied volatility and how to calculate it in this section.Implied Volatility2m 8sImplied Volatility Inference2mEfficient Way to Calculate Implied Volatility2mCalculate Implied Volatility2mImplied Volatility10mCalculate Implied Volatility5m
- Implied Volatility PercentileIn this section, you will learn what implied volatility percentile is and how it can be a useful metric when deploying your options trading strategy. You will also learn how to calculate and plot the implied volatility percentile levels to determine the ideal time to deploy your strategy.Implied Volatility Percentile2m 42sDisadvantage of Implied Volatility2mNeed for Implied Volatility Percentile2mShort Butterfly Strategy2mIVP Value Inference2mCalculate IVP2mLow IVP Range2mImplied Volatility Percentile10mCalculate Implied Volatility Percentile5m
- Technical IndicatorWhen it comes to systematic options trading, having well-defined entry rules is crucial. In general, a single indicator may not be enough to make a trading decision because false signals may occur. We can use any other technical indicator in addition to the implied volatility percentile to improve the signal's quality. In this section, you will learn about the ADX indicator, and how it can be a useful metric when it comes to deploying your trading strategy.ADX2mAverage Directional Index10mCalculate ADX5m
Butterfly Strategy Backtest
In this section, you will understand the need for sound entry and exit conditions for any options trading strategy and finally, backtest the short butterfly trading strategy.Backtesting Short Butterfly6mEntry and Exit Logic2mShort Butterfly2mEntry Conditions2mHigh IV Percentile2mIV Percentile2mADX Value2mExit Condition2mExtremely High IVP Value2mBacktesting Short Butterfly5mEntry Conditions for Short Butterfly5mExit Condition for Short Butterfly5mTotal PnL2m- Risk ManagementIn this section, you will understand the need for risk management and position sizing and apply the concept of risk management using stop-loss and take-profit.Risk Management5m 16sCapital Allocation2mBlack Swan Events2mHedging Instruments2mShort Straddle2mHedging Short Straddle2mHedging Long Straddle2mSL Percentage2mExit Price2mBacktesting Short Butterfly with SL and TP5mValid Exit Conditions2mStart Date for Backtesting2mAdditional Reading on the Kelly Criterion and Volatility Targeting2mPosition Sizing2m 20s2% Rule2mTrading Capital2m10% Rule2mPosition Sizing Techniques2m
- Trade Level AnalyticsAnalysing certain metrics will help you understand whether your strategy is working. Trade level analytics represents how a strategy has been performing over a given period. In this section, you will be learning how to calculate and interpret a few widely used analytics such as number of winning trades, number of losing trades, average profit or loss per trade, etc.Trade Level Analytics I5mTrade Level Analytics II4m 21sDefine Win Trades2mCalculate Win/Loss Rate2mCalculate Average PnL Per Trade2mIdentify the Correct Strategy-I2mIdentify the Correct Strategy-II2mLimitations of Win Trade2mCalculate Average Trade Duration2mInterpret the Profit Factor2mCalculate the Profit Factor2mTrade Level Analytics10mAverage PnL Per Trade5mLimitations of Profit Factor2mAverage Trade Duration5mWin Percentage5mAnalyse the Strategy Performance2m
- Cost of Setting Up Options StrategyIn this section, you will learn about the costs associated with setting up an options trading strategy. You will understand in detail the costs associated with setting up a short butterfly strategy.Cost of Setting Up Butterfly Spread6m 27sCost of Buying and Selling Options5mNotional Value5mMargin Required To Sell Options5mCost of Buying Options5mCost of Selling Options5mMargin Benefit5m
Strategy Analysis
Returns and risk are both factors that determine the performance of a strategy. As you proceed through this section, you will learn how to quantify the performance of your strategy based on the return and risk using measures such as Sharpe Ratio and Tail Risk.Sharpe Ratio and Tail Risk5m 49sSharpe Ratio of a Strategy2mSharpe Ratio Calculation2mStrategy Comparison2mDrawback of Sharpe Ratio2mMaximum Drawdown Calculation2mMaximum Drawdown Comparison2mMaximum Drawdown of a Strategy2mStrategy Analysis5mCAGR5mSharpe Ratio5mMaximum Drawdown5mIron Condor
The iron condor strategy, which is one of the most popular options trading strategies, will be covered in this section. It also discusses the appropriate market conditions for deploying the strategy. You'll also learn how to set up the strategy and put it into action with Python.Iron Condor3m 59sButterfly vs Iron Condor2mSetup Iron Condor2mMaximum profit2mMaximum Loss2mBacktesting Iron Condor5mSpread Trading
In this section, you learn about options spread trading. You will learn about the bull call, and bear put spread, the most well-suited market conditions to deploy these strategies, and how to set up and implement them in Python.Spread Trading4m 52sVolatility vs Direction2mCall Option2mBull Call Spread2mBearish View2mSetup Bull Call Spread2mBull Call Spread Payoff2mSetup Bear Put Spread2mBear Put Spread Payoff2mEntry and Exit Conditions10mBacktesting Spreads10mLong Entry5m- Do's and Don'tsEvery system needs to be built in a certain manner. If you build the system, you may be doing some activities that should be avoided and omitting others that should be exercised. This section reveals the four things that every trader should avoid and the four things they must do while building a system.The 4 Do'sAdvantage of a Credible Source2mTransaction Costs and Slippages2mIdentify the Need for Capital Buffers2mCalculate the Capital Buffer2mIdentify the Need for Risk Management2mCalculate the Stop-Loss2mWays to Diversify a Portfolio2mIdentify the Do's of Options Trading2mThe 4 Don'ts4m 32sIdentify the Don'ts of Options Trading2mSystem Performance2mIdentify the Correct Course of Action2m
Options Strategy Selector
In this section, you will learn the options strategy to capitalise on theta and interest rates.Options Strategy Selector10mProfitable Trade2mCalendar Spread2mOption Strategy - I2mOption Strategy - II2mBorrowing from the Market2mPayoff at Expiry2mDouble Benefit2mTest on Indicators and Option Strategies14m- Capstone ProjectThis section will help you to develop a ratio spread strategy and backtest it. You will also compute its performance metrics.Getting Started10mProblem Statement10mCode Template and Data Files2mCapstone Project Model Solution10mCapstone Solution Downloadable2m
- Live Trading on IBridgePyIn this section, you would go through the different processes and API methods to build your own trading strategy for the live markets, and take it live as well.Uninterrupted Learning Journey with Quantra2mSection Overview2m 2sLive Trading Overview2m 41sVectorised vs Event Driven2mProcess in Live Trading2mReal-Time Data Source2mCode Structure2m 15sAPI Methods10mSchedule Strategy Logic2mFetch Historical Data2mPlace Orders2mIBridgePy Course Link10mAdditional Reading10mFrequently Asked Questions10m
- Paper and Live TradingTo make sure that you can use your learning from the course in the live markets, a live trading template has been created which can be used to paper trade and analyse its performance. This template can be used as a starting point to create your very own unique trading strategy.Template Documentation10mTemplate Code File2m
- Run Codes Locally on Your MachineIn this section, you will learn to install the Python environment on your local machine. You will also learn about some common problems while installing python and how to troubleshoot them.Python Installation Overview1m 59sFlow Diagram10mInstall Anaconda on Windows10mInstall Anaconda on Mac10mKnow your Current Environment2mTroubleshooting Anaconda Installation Problems10mCreating a Python Environment10mChanging Environments2mQuantra Environment2mTroubleshooting Tips for Setting Up Environment10mHow to Run Files in Downloadable Section?10mTroubleshooting for Running Files in Downloadable Section10m
- SummaryIn this section, we will briefly summarise everything that you have learned in this course. You will also find the downloadable unit which contains all the code as well as the data files used in the course, in a zip format for you to download and tweak on your local system.Course Summary3m 34sAdditional Reading - Trade Adjustments2mSources and References10mCourse Summary and Next Steps10mPython Codes and Data2m
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Faqs
- When will I have access to the course content, including videos and strategies?
You will gain access to the entire course content including videos and strategies, as soon as you complete the payment and successfully enroll in the course.
- Will I get a certificate at the completion of the course?
Yes, you will be awarded with a certification from QuantInsti after successfully completing the online learning units.
- Are there any webinars, live or classroom sessions available in the course?
No, there are no live or classroom sessions in the course. You can ask your queries on community and get responses from fellow learners and faculty members.
- Is there any support available after I purchase the course?
Yes, you can ask your queries related to the course on the community: https://quantra.quantinsti.com/community
- What are the system requirements to do this course?
Fast-speed internet connection and a browser application are required for this course. For best experience, use Chrome.
- What is the admission criteria?
There is no admission criterion. You are recommended to go through the prerequisites section and be aware of skill sets gained and required to learn most from the course.
- Is there a refund available?
We respect your time, and hence, we offer concise but effective short-term courses created under professional guidance. We try to offer the most value within the shortest time. There are a few courses on Quantra which are free of cost. Please check the price of the course before enrolling in it. Once a purchase is made, we offer complete course content. For paid courses, we follow a 'no refund' policy.
- Is the course downloadable?
Some of the course material is downloadable such as Python notebooks with strategy codes. We also guide you how to use these codes on your own system to practice further.
- Can the python strategies provided in the course be immediately used for trading?
We focus on teaching these quantitative and machine learning techniques and how learners can use them for developing their own strategies. You may or may not be able to directly use them in your own system. Please do note that we are not advising or offering any trading/investment services. The strategies are used for learning & understanding purposes and we don't take any responsibility for the performance or any profit or losses that using these techniques results in.
- I want to develop my own algorithmic trading strategy. Can I use a Quantra course notebook for the same?
Quantra environment is a zero-installation solution to get beginners to start off with coding in Python. While learning you won't have to download or install anything! However, if you wish to later implement the learning on your system, you can definitely do that. All the notebooks in the Quantra portal are available for download at the end of each course and they can be run in the local system just the same as they run in the portal. The user can modify/tweak/rework all such code files as per his need. We encourage you to implement different concepts learnt from different learning tracks into your trading strategy to make it more suited to the real-world scenario.
- If I plug in the Quantra code to my trading system, am I sure to make money?
No. We provide you guidance on how to create strategy using different techniques and indicators, but no strategy is plug and play. A lot of effort is required to backtest any strategy, after which we fine-tune the strategy parameters and see the performance on paper trading before we finally implement the live execution of trades.
- What does "lifetime access" mean?
Lifetime access means that once you enroll in the course, you will have unlimited access to all course materials, including videos, resources, readings, and other learning materials for as long as the course remains available online. There are no time limits or expiration dates on your access, allowing you to learn at your own pace and revisit the content whenever you need it, even after you've completed the course. It's important to note that "lifetime" refers to the lifetime of the course itself—if the platform or course is discontinued for any reason, we will inform you in advance. This will allow you enough time to download or access any course materials you need for future use.
- What is systematic options trading?
Systematic options trading is a methodical approach to trading options. It is based on proper planning and sound research. To trade options systematically, you need to have a option trading system and a well-defined plan in place. You need to define entry rules regarding when to initiate a particular options strategy and exit rules so that you know when to exit a trade. You need to manage the risk associated with your trading strategy and backtest it to ensure that the system actually works.
- Why systematically trade options?
A systematic approach to options trading helps to avoid common mistakes made by most traders. This can increase your chance of being a successful options trader. Trading options systematically can help you to manage risk and your capital while trading.
- How does systematic options trading work?
A systematic approach to trading involves multiple steps. These steps include getting data, ensuring the quality of data, defining entry and exit rules, backtesting your strategy and evaluating the performance of your strategy. This step-by-step approach is an effective way of trading options as it reduces the chances of making mistakes made commonly by traders.
- How to get options data for systematic trading?
You can use a paid or free service to retrieve data. You can check the data vendors authorised by the stock exchange you are trading on. Some of the sources for data specific to the US markets are Tick Data, AlgoSeek etc. And for data specific to the Indian markets, you can retrieve the data from Global Datafeeds, Kaggle etc.
- What are the best systematic options trading strategies?
Selecting an options trading strategy results from multiple factors, such as your trading goals, risk appetite, capital requirement, suitable market conditions etc. Based on these factors, you can select an options trading strategy. The butterfly, iron condor, bull call, and bear put strategies are a few examples.
- What returns are the backtests showing?
The primary objective of this course is:
- to programmatically backtest options trading strategies such as butterfly, iron condor and spread strategies,
- how to set up this strategy based on technical indicators, and
- add stop loss and take profit to the strategy.
The aim is to empower you with the right tools to increase your chances of success in options trading. The course provides sample strategies on real-world data for illustration purposes only.
- Is this course specific only to US markets? Does this cover Indian markets/options?
Yes, the course covers Indian options. The concepts covered in the course can be implemented on any options which are European such as S&P500 options, Nifty50 options etc.