I got interested and decided to see if I can find a better tool for Option backtesting than what the ToS platform has in Thinkback, it is OK but looking for something faster. A quick Google search and this is what I found below. If anybody has used any of these products can you please write a short review or feel free to PM me directly
I am interested in testing Options on Equities as well as Futures. So if the tool had SPAN and Reg-T margin requirements built in that would be perfect
I am the creator of getvolatility.com, thank you for mentioning it here Chubbly! It's currently in beta, and I'd appreciate any feedback on it.
In general, the app will show you historical prices and back-tested payoffs for any option strategy. It also highlights opportunities which are cheap or expensive today after running statistical analysis on all of the historical data it has. It also includes detailed historical implied volatility, skew, and surface charting.
I am happy to answer any questions anyone has on it!
Trading: Equities, index options and futures options
Posts: 175 since Apr 2010
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There are two programs I know that can support serious manual option back testing: OptionVue and Option Net Explorer. You can enter simple or complex trades in either program and use historical prices to obtain realistic results. OV has 30 minute history going back several years while ONE has 5 minute history. Either program will be a huge improvement over TOS.
I made a suggestion to Len Yates at OptionVue about increasing the speed of collecting back testing data. He's going to think about how to do that so it's a better experience. Currently it's quite slow when back testing SPX due to the large number of strikes and expirations.
OptionNET Explorer has very quick back testing data already and it is in 5-minute increments.
These are both for manual back testing only.
OptionNET Explorer is releasing an automated back tester in the near future. QuantyCarlo has one but it is currently off the market.
@ron99 suggested a successful ES put selling program some time ago, which later was modified by him. Backtesting is done via a special prodedure, which seems to be a bit complicated and time consuming.
Would it be possible to backtest this program using OptionVue or some other similar program in an easier way ? Does anybody have experience ?
Each of these tools have their strengths and weaknesses. For instance, OptionStack is great at backtesting complex option strategies, but Bloomberg / Deltix provides superior order execution services and advanced execution analysis.
The bottom line is that no one tool can satisfy all our trading needs. We use a combination of different tools in our trading toolbox.
The following user says Thank You to optionNinja for this post:
Hi. After months of hacking away, I am able to test technical setups on the underlying ticker and find an optimal options strategy for it. I ran across that method while reading market Wizards and came across the John Bender method. PM me for more details.
I am using Amibroker for backtesting and am able to simulate option returns paired with stock technical analysis. In the interest of full disclosure- for I am new to the site and don't want to violate vendor rules, I have a website and offer backtesting services for option traders. PM me for details.
I primarily use the tool to rule out broad strategies like "is put selling good at this vol level" or does a bollinger band breakout make money if used with a backspread,etc... Once I rule out the bad stuff and find good stuff, I scan then plug it into thinkorswim on-demand for tick by tick confirmation of the big picture backtests.
The following user says Thank You to galindog for this post:
For backtesting some simple strategies I've been using CMLviz's trade machine product for a few months now. It's only $49/mo and tests some simple strategies and instruments. One thing I like about it is its ability to test around earnings dates as I like to trade stock options before and after earnings.
About every day they also send a trade you might want to consider and include a sample backtest you can examine.
Here's a recent trade idea of a pre-earnings trade on Ambarella
I've done about 11 small but real-money trades so far just following their picks that I like and I'm net negative so far but it's too early to judge. But my own earnings trading strategies work better, so far. For $only 49 a month, though, I'll keep giving it a try but I'm starting to lose hope. The WFC loss was a big hit to the overall effort, thanks to their continued PR problems. I usually try something new for at least 20 trades before making a final judgment so the jury's still out on this one.
Interesting thread - am looking at all these services. For starters I did try the Ambarelli play and its up 21% on day 1 which is nice. As regards your trading though - geez the WFC position was way larger than others. You were trading practically 135K of WFC there - easy to lose money in those cases.
I didnt say your risk was 135K - I said you were trading 135K of WFC in that position. By way of comparison here are the sizes you were trading in the underlying for your other positions (approximately based on entry):
JPM 85K
FP 66K
SBUX 17K
LITE 35K
LRCX 51K
Googl 10K
MAR 73K
Q 73K
NVDA 34K
This is not your risk except in the sense that you could have been forced to buy 135K worth of WFC if it closed under 54 and above 52. Its simply that by trading a bigger chunk of underlying you get more brutal outcomes - your max win or loss is realised in bigger steps. I don't have the ability to look up historical option and IV/Greeks but just look at the following hypothesis where we assume all identical IV and Greeks with delta at 50.
You experienced a 1.9% move in the wrong direction with WFC - that's US$ 2500 (1.9% of 135k) at delta 50 - 1250. A similar move of the smaller underlying JPM trade would have meant a swing of only 800 bucks to the down side. Now in reality of course there are other things to take into account and we should calculate on standard deviation, the fact it was a spread and yada yada. My remark wasn't very sophisticated in that sense, its just when you trade more underlying you get more big outcomes.
The classic beginner mistake (I have been guilty of it) is to over dimension trades - when someone says they have 10 GOOGL ATM calls that doesn't sound like much compared to my portfolio where I have 38 outstanding positions the underlying value in both cases is about 1,000,000 $. Joe Newbie might be surprised that in a quick downturn of his Googl position he blows out his account.
When you have the big swing its also hard to patch up a trade.
Just as an aside though, as regards your claim that you risked only $2800 - perhaps I misread but I see
WFC p AUG17 54 sold @0.92
WFC p AUG17 52 bought @0.40
Hence you risked ($0.52-2)*2500= -$3700
Granted your theoretical max loss on the JPM or GOOGL was larger but the value in underlying was lower which made binary outcomes less likely. For that reason I would call those trades more conservative. The risk of trades can be viewed in a number of ways - your 2% rule is a good one but its just one rule by which to measure.
I recalculated your p&l (except the CBOE spread) based on a resizing your positions to all reflect the same value in underlying (just dividing the outcome by the gross value of the underlying you were trading). In that case the net of those trades is vastly positive. The reason is simple your big loser is downsized and the big winner - Googl - is upsized (if that's a word). Now granted in practice its unfeasible to get that outcome exactly - for one the options don't trade in fractions of 100 shares - but its just to give an idea. It seems the advice of your site is not so bad. Just my $0.02.
Having said that I missed my chance to cash in on AMBA in the first day and am down 50$ for now :-( Lets hope the rally comes tomorrow.
The following 2 users say Thank You to Trusty Jules for this post:
You are correct, I bought the 52 put for $0.40, not $0.04, so my credit was $0.52, so my max risk was $1.48 per contract, or $3,700 total.
I appreciate the potential problem of expiration with price in between the strikes, but I never carry these to expiration, so that's not an issue. However, if my short 54 spread is exercised while I was in the position, I would suddenly end up short 2,500 shares of WFC, which would tie up a lot of margin! But I have enough portfolio margin to unwind that, so I'm not too concerned with that. But, yes, early assignment is a real risk not many people understand until it happens to them (it happened to me once).
Thanks for double-checking my work.
Update: I closed my GOOGL trade for +$880.67 and did a long call trade on WDAY on Monday, exited today just before earnings for a $1,140 gain so I'm now net positive on all of these trades. The CBOE trade is still open, profitable.
My goal, since I'm experimenting, is to try to max risk about $2-4k per trade, a little over 1-2% of my account, hoping the probabilities play out in the long run for an overall profit, hence the sizing. I'm trying to be a casino and frequently realize my edges, and play as many consecutive hands as possible, with as many systems and setups that I can. This is just one that I'm experimenting with. I have like 5 other ways I trade, including the swing trading systems on my website.
The following user says Thank You to shodson for this post:
I have been using AlgoNET Explorer for a couple of months and overall I find it to be pretty awesome if you are familiar with code (it supports C# and VB.NET scripting language) - below is a journal/blog post I wrote that has some screen shots and code fragment
Jminck, any chance you could mention how one can use AlgoNET Explorer? I read it is currently only institutional, or is there another way of getting a trial/purchasing an individual license?
