Expiration & Selector
Last updated
Last updated
Currently, there are 4 different expirations available with the option of more being added in the future.
Find the details about each of them below:
0 DTE trading has drastically gained relevancy in the last couple of years. Fast theta decay and huge gamma swings lure in lots of speculators in pursuit of profits.
But not only risk-seekers are captivated by those shorter term options. Lower capital requirements mean a lower threshold for entry and lots of occurences over a short time make them a great prospect for statistical arbitrage, yielding fast convergence to the expected averages.
Trades are entered at market open and left to expire at the end of the day.
Overnight trades allow trades to capture theta decay over night or hedge against risks.
The backtested overnight trades are opened half an hour before the close of the New York session and closed at market open the following day. Note that striclty only 1 DTE options are considered for this, so no weekends/holidays.
Theta decay is especially prevalent over the weekend since markets are closed for two consecutive days. Options offer a great way to let your capital work even during those times by capturing the deecay.
Just like the overnight trades, weekend trades are opened 30 minutes before the New York session close and closed at the following Monday's open. Here as well, note that striclty only 3 DTE options are considered, meaning if Friday or Monday turn out to be holidays, those will not be counted for consistency resasons, but might be added in the future.
As a reference point, we also included 7 DTE options. This can be useful to compare which effect the expiration has on the effectiveness of certain strategies or parameters.
Trades are opened at the start of the New York session and let expire.
The selector is used to optimise the strategies performance. FireForge checks under which conditions the strategy performs best according to your CEM and shows you those values directly in the results.
For example, if you want to selectively trade a strategy based on VIX at entry time but you don't know which values are best, FireForge tests all of them for you and shows you the optimal values in the results.
FireForge offers two main types of selectors:
VIX: The standard 30-day volatility index, commonly used in market analysis to gauge expected market volatility over the next 30 days.
Custom VIX: Calculated as the width of a 20-delta strangle divided by the midpoint of their strikes, multiplied by 1000. Custom VIX provides an immediate view of the volatility environment surrounding the trade’s initiation, making it more relevant for short-term entries.
Sometimes it can happen that the absolute values of your CEM are very small ro big. This setting normalises them so that the best one always has a value of 100.
The original values can be useful to compare strategies of different expirations against each other though.
This is an advanced feature and will show you a heatmap of all strategies for every metric, given a positive CEM value.
This allows you to see which strategies are most robust and how they all compare against each other, which is extremely powerful to finetune the strategies to your needs.
