The Option Alpha autotrading platform includes a backtester. Backtesting is a tool that gives you context around the historical performance of a strategy. Backtesting is not indicative of future performance, but it may help you discover, confirm, or avoid specific strategies.
Running a new backtest is simple. From the Option Alpha homepage, select “Backtester.” This will take you to the backtester homepage. Select “New Backtest.”
This page will define the criteria of your backtest. You can customize five settings:
- Ticker symbol
- Backtest duration
- Trade frequency
You can choose from the list of available ticker symbols.
There are four backtest durations available with different lookback periods:
- All-time (for the history of the ticker symbol)
There are four trade frequencies available:
- Sequential trades only open new positions once an existing position has been closed.
- Weekly trades open a new position every week if there are available positions and/or capital.
- Monthly trades open a new position every month if there are available positions and/or capital.
- Quarterly trades open a new position every quarter if there are available positions and/or capital.
Enter a starting capital amount. You can create up to three allocations and compare how the different allocation settings would perform using the same backtesting data.
Each allocation field gives you four options:
- % of capital per position (dynamic as account size fluctuates)
- % of capital per position, with a maximum percentage total for all positions at once
- $ amount per position
- $ amount per position, with a maximum percentage total for all positions at once
Finally, choose a strategy to backtest from the available options in the dropdown menu.
The options strategies require you to input entry conditions specific to the strategy:
- Short and/or long option delta
- Days until expiration
- Minimum and maximum IV rank
The options strategies require you to input exit conditions specific to the strategy:
- Profit-taking %
- Stop-loss %
- Days to expiration
When you finish setting up the strategy, select “Run Backtest” to view the results.
NOTE: It may take a few minutes for the backtest to complete. Once the backtest is queued, you can exit the page, and it will be available on the Backtester homepage under the “My Backtests” tab.