1 of 33

MesoSim: �Overview and �Basic operations

Tibor Kiss <tibor@deltaray.io>

2023. 02. 09.

🏗️ Work In Progress version! 👷

1

2 of 33

Agenda

Overview�
Portal overview�

Prerequisite crash course:

JSON
Lua�

Theory: Job Definition

Structure
Entry and Exit
Adjustments
Indicators
Simulator Settings
Variables
Functions

Workflow�
Practice: Strategies

Short Put
Strangle
Iron Condor�

Backtest Analytics

2

3 of 33

MesoSim - Overview

Automated Backtest Service specialized in Options

Goal #1: Enable quick and precise validation of advanced Options Strategies

Goal #2: Reduce barrier of entry for automated Options Strategy development

Compared to QuantConnect, Backtrader, Zipline, etc.� �

High resolution (5min) data for Intraday modeling:

SPX: 2005 .. Yesterday - sourced from CBOE
BTCUSD / ETHUSD: 2019 .. Today sourced from Deribit
More to come in 2023!

3

4 of 33

MesoSim - Portal

4

5 of 33

Prerequisite Crash Course: JSON

“JSON is a … file format … that uses human-readable text to store and transmit data objects consisting of attribute–value pairs and arrays” - Wikipedia�
Used in MesoSim to specify the job / backtest.��
Example:�{

"Title": "Dynamic Hedging",

"Author": "Nassim Taleb",

"Publication Year": 1996,

"Categories": � [

"Options",

"Hedging",

"Derivative Securities"

]

}�

Attribute (aka key)

Value

Text (aka string)

Number (aka integer)

Array (or list) of strings

Object�declaration

5

6 of 33

Prerequisite Crash Course: JSON pt2

6

7 of 33

Prerequisite Crash Course: Lua

“Lua is a lightweight, high-level, multi-paradigm programming language designed primarily for embedded use in applications.” [Wikipedia]�
Used in MesoSim to evaluate Statements�
Examples:�Lua 5.4.4 Copyright (C) 1994-2022 Lua.org, PUC-Rio

> 1 + 1

2

> 3 < 5

true

> 100 + (2 * 7) / 4.3

103.25581395349

> max(1, 5)�5

> abs(-4.3)�4.3

Prompt

Statements

Result

Statements with function call

7

8 of 33

Concept: Job Definition

The easy language of options trading:

Domain Specific Language to describe the entire trade lifecycle
JSON Structure with LUA Statements

Example mental model:

Environment: Backtesting on SPX with $10000 Planned Capital between 2020 and 2023�
Structure: Trading Put Butterflies 60 days out�
Entry: Initiating the trade 60 minutes after open every Monday�
Exit: Closing after 20 days in trade or when TP or SL hits�
Adjustment: Adjust the Upper Long leg if trade becomes too directional�
SimSettings: Expect fills at Mid Price with slippage of 0.05 per contract

8

9 of 33

Concept: High Level Job Definition

What to trade: Butterfly, Iron Condor, etc

When to enter

How to adjust

When to exit

Environment

9

10 of 33

Concept: Environment & SimSettings

Top level environment related variables:

Name: Identifier of the run. Use generate to create a new one
TemplateName: Custom text.
Start / End: Defines the backtest period
Cash: Planned Capital for the run ($/BTC/ETH)
Symbol: Defines that underlying to trade� ��

SimSettings - Simulation related settings:

commission: Amount of commission value per leg ($/BTC/ETH)
slippage: Amount of slippage per leg ($/BTC/ETH)
fill model: AtBidAsk or AtMidPrice

�

10

11 of 33

Concept: Structure [1/2]

Describes what’s being traded:�Structure = Name + Expirations + Leg�
Name: �Unique name (such as: Iron Condor)�
Expirations: �List of Expiration Objects defining tenors �using Dates Till Expiration within Min-Max range.�
Legs:�List of Leg Objects defining Options Contracts�with their respective Quantity. Leg refers back�to Expiration using Expiration’s Name.�

11

12 of 33

Concept: Structure [2/2]

StrikeSelector (object):�Selects Strike of the Option Contract based on one of:�Price, Greeks, IV or absolute strike value (Statement). ��Min-Max (optionally) defines the range for selection�

Full example with no lower boundary:�

12

13 of 33

Concept: Entry [1/2]

Describes when to potentially enter trades �
Schedule: �Defines when entries are considered.�Accepted values for Every:�day, mon, tue, wed, thu, fri, sat, sun, 5min�
Conditions: �Gates entry with a pre-condition. �Example use: IV Rank check�
AbortConditions:�Gates entry with a post-condition, evaluated the position is planned.�Example use: Abort entry if Position Theta is negative�

13

14 of 33

Concept: Entry [2/2]

ReentryDays (integer):�How many days to wait until a new trade is taken.�Valid values: 0 .. inf�
Concurrency (object):�Enables multiple trades in flight (aka Campaign mode)�
VarDefines (attribute-value):�Capture state at trade initiation. ��Example use: Record Position Theta at initiation�and exit later, when position deta decayed.

14

15 of 33

Concept: Exit

Schedule:�When to consider Exiting the position. See Entry…�
MaxDaysInTrade (integer):�Exit trade after a certain amount of days reached.�
ProfitTarget (statement):�Exit trade when the specified amount of profit is reached.�
StopLoss (statement):�Exit trade when the specified amount of loss is reached.�
Conditions (list of statements):�Exit when any of the included statement evaluates to true��Example: Exit when Position’s Theta decreases to 25% compared to Theta at Initiation.

15

16 of 33

Concept: Adjustment [1/2]

Describes when and how to adjust the position. [Optional]�Adjustment = Schedule + Conditions + Adjustment Actions��
Adjustments are conditional: �When the Statement evaluates to true then the�Adjustment Action is taken.��
Adjustment Actions:

MoveLegAdjustment: �Close the specified leg and re-open at a new strike.
AddStructureAdjustment:�Planned, but not available at the moment.�

�

16

17 of 33

Concept: Adjustment [2/2]

Conditional Adjustments in detail:��"ConditionalAdjustments": {

"abs(pos_delta) > 5": {

"MoveLegAdjustment": {

"LegName": "short_put",

"StrikeSelector": {

"Min": null,

"Max": null,

"Delta": "pos_delta - leg_short_put_delta"

}

Condition: abs(pos_delta) > 5�Becomes true when the absolute value of position delta is bigger than 5�
Delta selection: pos_delta - leg_short_put_delta�Take the position delta (before removing any leg) and subtract the specified leg delta. �That number will be our target delta for the new leg.

Statements

New Strike definition

17

18 of 33

Concept: Indicators

TA Indicators on the Underlying�
Indicator values accessible as variables in all Statements

Example:��

18

19 of 33

Concept: Variables

Purpose: Represent state in the simulator

Can be used in statements for conditions and calculations�
Types:

Built-in
Indicator
User Defined (via Entry.VarDef)

Built in variables:

19

20 of 33

Concept: Functions

Lua Functions available �in Statements:

abs
min
max
random
sqrt
pow
log
ceil
floor

��

Example: Adding randomness to entries

Example: Compounding

��

20

21 of 33

MesoSim Workflow

Simple Run

Analyze

Clone

Run

Change

Save as template

Run from template on period of interest

Iterate

Analyze

For�each�period

Once�happy

21

22 of 33

- Strategies -

22

23 of 33

Practice - Strategies - Built-in Templates

Template name	Strategy	Note
[Strangle]	Short Strangle	Contains adjustments to maintain delta neutrality.
[Strangle-DownDay]	Short Strangle	Enters on days where open < yesterday’s close.�Demonstrates Entry.Conditions.
[Strangle-ThetaFilter]	Short Strangle	Enters only if pos_theta > 50. �Demonstrates Entry.AbortCondition.
[Strangle-Campaign]	Short Strangle	Demonstrates Multiple Positions in Flight (aka Campaign mode).�
[IC-0DTE]	Iron Condor	0 Days Till Expiration Iron Condor. �Intraday strategy.
[ShortPut-EMACross]	Short Put	Demonstrates Indicators. �
[ShortPut-HighIV]	Short Put	Demonstrates IV Rank.�
[ThetaEngine]	Short Put	David Sun’s Theta Engine.�Demonstrates Credit Targeted Dynamic Sizing.
To be added: BoxCar-NG	Condor	Currently not a built-in template, but clonable from here:�https://blog.deltaray.io/boxcar-ng-an-optimized-boxcar

23

24 of 33

Practice - Strategies - Short Put - Simple Run:

24

25 of 33

Practice - Strategies - Short Put - Job Definition:

25

26 of 33

- Strategy live coding -

26

27 of 33

Backtest Analytics:

PnL Graph: Log Returns!�
Trade Statistics table�
Greeks Graph�
Indicator Graph

Intra-trade PnL (MAE / MFE) graph�

�

Events Tab (keyboard navigation)�
Full tearsheet (very soon)

Trade Export to ONE�
NAV CSV Export �
Events JSON export for post-processing�

27

28 of 33

Event Viewer:

Provides observability to:

Expiration selection
Strike Selection
Entries
Exits
… Pretty much everything�

Keyboard navigation enabled:�Click and use arrow keys for quick nav.��
Exposes variables for every event�

�

28

29 of 33

References

MesoSim Portal:�https://portal.deltaray.io�
Documentation:�https://docs.deltaray.io
Blog posts: �https://blog.deltaray.io��
Boxcar-NG: https://portal.deltaray.io/backtests/1c8fffc3-f463-4736-9ec7-e4c88658aa94�
DeltaRay Slack

29

30 of 33

Thank You!�Any questions?�

30

31 of 33

Backup slides

31

32 of 33

MesoSim - Timeline

Development started: March 2022�
Private beta: June 2022�
Public GA (v1.0): July 2022

Milestones since v1.0:

v2.0: Multiple Positions in Flight, Indicators, IV Rank & Pct
v2.1: Event Log Export, Better Missing Data Handling, Mobile improvements
v2.2: Simple Run interface
v2.3: Crypto (beta), MaxLegs=20, RootSelector�

2023 Plans:

More flexibility by scheduled Statement Execution
CSV Input Support
Relative Expirations
Content: Education, Blog posts, trades

32

33 of 33

MesoSim: Portal

Backtests: �Lists the executed backtests including it’s statistics�
New Run

Simple: Simplified user interface to quickly check ideas.�
JobEditor: Complete user interface for strategy development.�
Templated: Run previously saved strategies in various time frames easily�

Manage Templates:

Create / Modify / Delete templates. Not a replacement for JobEditor!�

User menu: Simulation Preferences, Subscription Management

Site:

Service Status, Contact form and T&C�

References: Blog, Docs, Slack

33