Systematic options trading is an approach in which options positions are opened, adjusted and closed by explicit rules that are fixed in advance and applied consistently. The rules specify which contracts to trade, by expiry and by strike or delta, how large each position should be, when to hedge and when to exit. It is the options counterpart of quantitative trading in shares and futures.
Common examples include writing a covered call on an index every month, selling puts or an iron condor at set deltas to collect the volatility risk premium, and buying options as a standing hedge against market falls. Several exchanges publish benchmark indices that track such rule-based strategies. The rules can be tested on history, but options backtesting is demanding: each underlying has hundreds of contracts, spreads are wide, and strategies that sell options can show long, steady gains before a single large loss.