Introduction​

This article continues from the MesoLive Development Update #1, published on our blog in October 2023.

Since the last report, the majority of MesoSim’s functionality has been integrated into MesoLive. We feel it’s time to provide an update on the current status and outlook of the offering.

In the past 10 months, we focused primarily on trade initiation, adjustments, and exits. During this period, our private beta users tracked more than 2,000 positions, with MesoLive assisting in the opening of over 800 of them.

The Event​

On August 5, 2024, Japanese stocks suffered their biggest daily loss since 1987. The Nikkei 225 closed down by over 12%. Shortly afterward, the Bank of Japan raised interest rates, causing the yen to surge higher. The increased interest rates and stronger yen forced market participants to unwind their yen carry trades.

Overview​

Over the last two years, we have shared numerous backtests featuring public options trading strategies (such as NetZero, Boxcar, or Weekend Effect), strategy variants contributed by our customers (Volatility Hedged Theta Engine, Relaxed SuperBull trade), and built-in strategy templates that turned out to be good starting points (trailing stop, 0DTE-IC).

These income strategies cover a wide range of moneyness and time to maturity. Some stand out, others are just average and some are not performing well currently.

It is well known that diversification helps build better investments.In this article, we will explore how Equal Weighting and Modern Portfolio Theory might help improve investment performance.

The anomaly​

Calendar effects/anomalies are well-known to investors.

QuantPedia's Composite Seasonality Index (QCSI) combines several, seasonal patterns such as the Turn of the Month, FOMC Meeting Effects, and Option-Expiration Week. It has been shown that using the composite calendar in a long-only setup outperforms the market. 

There aren’t many scientific publications on practical options trading. In this article, we will recreate the results of one of the few, titled: Differential Evolution Optimization of the Broken Wing Butterfly Option Strategy by David Munoz Constantine, Richard Tymerski, and Garrison Greenwood.