quantconnect--lean/Common/Securities/Option/OptionMarginModel.cs

/*
 * QUANTCONNECT.COM - Democratizing Finance, Empowering Individuals.
 * Lean Algorithmic Trading Engine v2.0. Copyright 2014 QuantConnect Corporation.
 *
 * Licensed under the Apache License, Version 2.0 (the "License");
 * you may not use this file except in compliance with the License.
 * You may obtain a copy of the License at http://www.apache.org/licenses/LICENSE-2.0
 *
 * Unless required by applicable law or agreed to in writing, software
 * distributed under the License is distributed on an "AS IS" BASIS,
 * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
 * See the License for the specific language governing permissions and
 * limitations under the License.
*/

using System;
using QuantConnect.Orders;
using QuantConnect.Orders.Fees;

namespace QuantConnect.Securities.Option
{
    /// <summary>
    /// Represents a simple option margining model.
    /// </summary>
    /// <remarks>
    /// Options are not traded on margin. Margin requirements exist though for those portfolios with short positions.
    /// Current implementation covers only single long/naked short option positions.
    /// </remarks>
    public class OptionMarginModel : SecurityMarginModel
    {
        // initial margin
        private const decimal OptionMarginRequirement = 1;
        private const decimal NakedPositionMarginRequirement = 0.1m;
        private const decimal NakedPositionMarginRequirementOtm = 0.2m;

        /// <summary>
        /// Initializes a new instance of the <see cref="OptionMarginModel"/>
        /// </summary>
        /// <param name="requiredFreeBuyingPowerPercent">The percentage used to determine the required unused buying power for the account.</param>
        public OptionMarginModel(decimal requiredFreeBuyingPowerPercent = 0)
        {
            RequiredFreeBuyingPowerPercent = requiredFreeBuyingPowerPercent;
        }

        /// <summary>
        /// Gets the current leverage of the security
        /// </summary>
        /// <param name="security">The security to get leverage for</param>
        /// <returns>The current leverage in the security</returns>
        public override decimal GetLeverage(Security security)
        {
            // Options are not traded on margin
            return 1;
        }

        /// <summary>
        /// Sets the leverage for the applicable securities, i.e, options.
        /// </summary>
        /// <param name="security"></param>
        /// <param name="leverage">The new leverage</param>
        public override void SetLeverage(Security security, decimal leverage)
        {
            // Options are leveraged products and different leverage cannot be set by user.
            throw new InvalidOperationException("Options are leveraged products and different leverage cannot be set by user");
        }

        /// <summary>
        /// Gets the total margin required to execute the specified order in units of the account currency including fees
        /// </summary>
        /// <param name="parameters">An object containing the portfolio, the security and the order</param>
        /// <returns>The total margin in terms of the currency quoted in the order</returns>
        protected override decimal GetInitialMarginRequiredForOrder(
            InitialMarginRequiredForOrderParameters parameters)
        {
            //Get the order value from the non-abstract order classes (MarketOrder, LimitOrder, StopMarketOrder)
            //Market order is approximated from the current security price and set in the MarketOrder Method in QCAlgorithm.

            var fees = parameters.Security.FeeModel.GetOrderFee(
                new OrderFeeParameters(parameters.Security,
                    parameters.Order)).Value;
            var feesInAccountCurrency = parameters.CurrencyConverter.
                ConvertToAccountCurrency(fees).Amount;

            var value = parameters.Order.GetValue(parameters.Security);
            var orderValue = value * GetInitialMarginRequirement(parameters.Security, value);

            return orderValue + Math.Sign(orderValue) * feesInAccountCurrency;
        }

        /// <summary>
        /// Gets the margin currently alloted to the specified holding
        /// </summary>
        /// <param name="security">The security to compute maintenance margin for</param>
        /// <returns>The maintenance margin required for the </returns>
        protected override decimal GetMaintenanceMargin(Security security)
        {
            return security.Holdings.AbsoluteHoldingsCost * GetMaintenanceMarginRequirement(security, security.Holdings.HoldingsCost);
        }

        /// <summary>
        /// Gets the margin cash available for a trade
        /// </summary>
        /// <param name="portfolio">The algorithm's portfolio</param>
        /// <param name="security">The security to be traded</param>
        /// <param name="direction">The direction of the trade</param>
        /// <returns>The margin available for the trade</returns>
        protected override decimal GetMarginRemaining(SecurityPortfolioManager portfolio, Security security, OrderDirection direction)
        {
            var result = portfolio.MarginRemaining;

            if (direction != OrderDirection.Hold)
            {
                var holdings = security.Holdings;
                //If the order is in the same direction as holdings, our remaining cash is our cash
                //In the opposite direction, our remaining cash is 2 x current value of assets + our cash
                if (holdings.IsLong)
                {
                    switch (direction)
                    {
                        case OrderDirection.Sell:
                            result +=
                                // portion of margin to close the existing position
                                GetMaintenanceMargin(security) +
                                // portion of margin to open the new position
                                security.Holdings.AbsoluteHoldingsValue * GetInitialMarginRequirement(security, security.Holdings.HoldingsValue);
                            break;
                    }
                }
                else if (holdings.IsShort)
                {
                    switch (direction)
                    {
                        case OrderDirection.Buy:
                            result +=
                                // portion of margin to close the existing position
                                GetMaintenanceMargin(security) +
                                // portion of margin to open the new position
                                security.Holdings.AbsoluteHoldingsValue * GetInitialMarginRequirement(security, security.Holdings.HoldingsValue);
                            break;
                    }
                }
            }

            result -= portfolio.TotalPortfolioValue * RequiredFreeBuyingPowerPercent;
            return result < 0 ? 0 : result;
        }

        /// <summary>
        /// The percentage of an order's absolute cost that must be held in free cash in order to place the order
        /// </summary>
        protected override decimal GetInitialMarginRequirement(Security security)
        {
            return GetInitialMarginRequirement(security, security.Holdings.HoldingsValue);
        }

        /// <summary>
        /// The percentage of the holding's absolute cost that must be held in free cash in order to avoid a margin call
        /// </summary>
        public override decimal GetMaintenanceMarginRequirement(Security security)
        {
            return GetMaintenanceMarginRequirement(security, security.Holdings.HoldingsValue);
        }

        /// <summary>
        /// The percentage of an order's absolute cost that must be held in free cash in order to place the order
        /// </summary>
        private decimal GetInitialMarginRequirement(Security security, decimal holding)
        {
            return GetMarginRequirement(security, holding);
        }

        /// <summary>
        /// The percentage of the holding's absolute cost that must be held in free cash in order to avoid a margin call
        /// </summary>
        private decimal GetMaintenanceMarginRequirement(Security security, decimal holding)
        {
            return GetMarginRequirement(security, holding);
        }

        /// <summary>
        /// Private method takes option security and its holding and returns required margin. Method considers all short positions naked.
        /// </summary>
        /// <param name="security">Option security</param>
        /// <param name="value">Holding value</param>
        /// <returns></returns>
        private decimal GetMarginRequirement(Security security, decimal value)
        {
            var option = (Option) security;

            if (value == 0m ||
                option.Close == 0m ||
                option.StrikePrice == 0m ||
                option.Underlying == null ||
                option.Underlying.Close == 0m)
            {
                return 0m;
            }

            if (value > 0m)
            {
                return OptionMarginRequirement;
            }

            var absValue = -value;
            var optionProperties = (OptionSymbolProperties) option.SymbolProperties;
            var underlying = option.Underlying;

            // inferring ratios of the option and its underlying to get underlying security value
            var multiplierRatio = underlying.SymbolProperties.ContractMultiplier / optionProperties.ContractMultiplier;
            var quantityRatio = optionProperties.ContractUnitOfTrade;
            var priceRatio = underlying.Close / (absValue / quantityRatio);
            var underlyingValueRatio = multiplierRatio * quantityRatio * priceRatio;

            // calculating underlying security value less out-of-the-money amount
            var amountOTM = option.Right == OptionRight.Call
                ? Math.Max(0, option.StrikePrice - underlying.Close)
                : Math.Max(0, underlying.Close - option.StrikePrice);
            var priceRatioOTM = amountOTM / (absValue / quantityRatio);
            var underlyingValueRatioOTM = multiplierRatio * quantityRatio * priceRatioOTM;

            return OptionMarginRequirement +
                   option.Holdings.AbsoluteQuantity * Math.Max(NakedPositionMarginRequirement * underlyingValueRatio,
                       NakedPositionMarginRequirementOtm * underlyingValueRatio - underlyingValueRatioOTM);
        }
    }
}