Step 1 of 2
The first step in setting up your options backtest includes choosing the option strategy to test, specific symbol or symbol group and the trade frequency. Once complete, click “Next Step” to further customize your backtest before running the analysis.
Select Option Strategy
Choose the option strategy you’d like to backtest from the available dropdown menu.
Choose Ticker Symbol
Select either an individual ticker symbol or a group of tickers. Note that when selecting a group of tickers we’ll pull the average results across all symbols in that grouping.
Determine Trade Frequency
Select the frequency at which trades will be entered when the filter parameters are met. Daily will enter trades each day, weekly we only enter one trade per week and sequential will enter trades one at a time (with no overlapping entries).
Step 2 of 2
Now that you’ve completed the basic strategy setup, it’s time to filter your backtest with the custom preferences below. Each options strategy type has specific variables from which you can test that will automatically adjust on the fly. Once complete, click “Run Backtest”.
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Days to Expiration (Average)
Select the targeted average days to expiration for your strategy. For example, if you select 30 days the system will enter trades as close to 30 days on average as possible. Some entries might be 25 days and some might be 35 days to expiration.
Minimum Implied Volatility (IV) Rank
Filter trade entries by minimum IV Rank levels. If the minimum IV Rank level is not observed then no trades will be made that day. If you choose None, the system will not use IV Rank as a filter for trade entry.
Choose the level at which you will close the trade and cut the loss. This is based on the credit/debit paid for each strategy type. If you select None, no stop loss will be used and all strategies will go to expiration.
Select the short strike delta value for the options you are selling. For neutral strategies, this is the short strike of each side of the overall strategy. Example: If you are backtesting a short strangle and select the .10 delta this would sell the .10 delta call and the .10 delta put options. If you select the .15 delta choice it will sell options closer in on both sides.
Select the long strike delta value for the options you are buying. Example: If you are backtesting a call debit spread and select the .60 delta this would start building the strategy with the purchase of the ITM .60 delta call options. If you select the .70 delta choice it will buy options even further ITM.
Select the front month delta value for the calendar spread you are testing. This delta value determines how far ITM or OTM your strategy payoff will be pinned moving forward.
Choose how wide you’d like the spread width of the contracts to be for testing. Please keep in mind that some tickers may not have the ability to go very wide so we suggest testing smaller spread widths at first and move up gradually. Example: Choosing a width of “3” would mean you might be selling the 100 strike puts and buying the 97 strike puts.
The chart below shows how your backtested strategy performed when compared to the broad S&P 500 index during the testing period. Hover over different dates and lines to see detailed portfolio values.
The gauges below give you an indication of the strategies overall win rate and potential drawdowns as well as the total trades executed during the testing period.
The chart below visually displays the distribution of monthly returns as well as the magnitude of those returns overtime.
The bar charts below show average profit/loss per day by total dollar amount per contract and percentage.
The bar charts below show average profit/loss per trade by total dollar amount per contract and percentage.
The table below displays the monthly and annual returns for the strategy during the testing period. When the monthly return equals 0% no trades were executed and the portfolio remained in cash.