[R-SIG-Finance] How to Get option prices of first and expiry date alone

[Brian G. Peterson]

On Wed, 2011-07-27 at 10:18 +0530, Subramanian S wrote:
> Pardon me if the question has been already posed.

Your subject "Get option prices of first and expiry date alone" doesn't
seem to match the rest of your email.

To deal with your subject, I would simply extract the dates of the
'first' and 'expiry' from your instrument metadata, then look up these
dates in your data.  On the first day a derivatives contract is
available to trade, you'll often find no trades or extremely wide
markets, or both, so I question the *premise* of your subject.

> what is the correct thing to do while dealing with multiple time series that
> are not synchronized?:
> A) remove rows from all series for dates in which one of the series does not
> have a value OR
> B) do some kind of an interpolation of values for these dates.

or
C) deal with the fact that real data aren't synchronized, are messy, and
don't match the textbook examples the vast majority of the time.

I plot and backtest data with missing values all the time, because that
is how real financial data works.  If you're trying to create a trading
system, you need to account for the structure of real data.

> My understanding: if i were doing a theoretical study, or just wanting to
> plot the multiple time series, the latter would be correct but if i
> am doing a portfolio/ trading system back testing, the latter wouldn't be
> technically correct. Would like to have more clarity.

Now, if we wanted to connect the subject of your email to the rest of
your email.... 

I could propose an example: 

Strategy Idea:
I have multiple option series, and I'm interested in figuring out 
if I should buy that option on the first day it is available for 
trade, and at what price.
Problem:
data is messy, and is often missing values on that first day
Opportunity:
use the prices from other more liquid options, plus decay,
to establish a theoretical price for every other option
Task:
build a trading system that uses the *implied* price to 
buy options on the first day, see if we make money at expiry.

Or something like that...

Regards,

   - Brian 

-- 
Brian G. Peterson
http://braverock.com/brian/
Ph: 773-459-4973
IM: bgpbraverock