Simulating weeklys with monthlies

Discussion in 'Options' started by Eliot Hosewater, Mar 4, 2011.

  1. It seems if you wanted to do some backtesting, like with TOS thinkBack on a stock where weekys are not available, you should be able to just treat the monthlies as expiring every week. If not then there would be an arbitrage opportunity in trading the real ones.

    Any thoughts?
  2. Never mind. It doesn't track very well. And any "arbitrage" would be the same as doing a weekly/monthly calendar spread. The weeklys are much more volatile as would be expected.
  3. I have never experienced weeklies with the same expiration as the monthly. I can't see any purpose to it.

    OTOH, I have found weeklies perform similarly to the last week of a monthly with respect to trading index options credit spreads. Therefore, the last week of a monthly may be useful for some back testing.
  4. Thanks. Yes, there are no separate weeklys on the last week of a monthly expiration.

    (BTW, I think it is the CBOE that uses the funny spelling.)
  5. There is no weekly (as defined) expiring on the third Friday of the month. Imagine that.
  6. atticus agreeing with my earlier post. Imagine that. :D
  7. Not at all. The sentence starting with "OTOH" was utterly moronic.
  8. Mean reversion.