The Option Backtesting Tool is a sophisticated simulation engine that enables users to evaluate the historical performance of options strategies across various market conditions. Built on a vector-based architecture, it is designed for speed, flexibility, and precision, making it ideal for both institutional research and advanced retail traders.
π Why Use This Tool?
Backtesting is essential for validating the logic and risk/reward profile of a strategy before risking real capital. The tool lets you:
- Build custom multi-leg option structures (e.g., verticals, calendars, ratio spreads)
- Simulate trades over historical data using dynamic parameters like delta-based strikes, DTE filters, and rolling logic
- Apply market signals and hedging rules to mimic real-world trading conditions
- Analyze outcomes using comprehensive metrics like CAGR, Sharpe, Max Drawdown, and detailed monthly P&L
π§ How It Works
At its core, the tool takes your defined option structure and walks through time, executing simulated trades based on your parameters:
- Structure Setup β Define the legs of your strategy (e.g., short 25-delta put, long 5-delta put)
- Rolling Rules β Choose when and how to roll positions (e.g., at 30 days to expiry)
- Signal Filters β Apply entry/exit logic based on external indicators or price behavior
- Performance Tracking β Track equity curve, trade logs, and profitability over time
π Key Features
- Support for multi-leg strategies with customizable weights
- Strike targeting via delta, % OTM, or fixed values
- Equity settings: compounding or fixed notional
- Optional hedging and rebalancing
- Trade signal integration
- Rich analytics: PNL breakdowns, trade counts, win rates, Sharpe ratio, and more
π Who Is It For?
- Options traders exploring new strategy ideas
- Quantitative analysts performing historical edge analysis
- Portfolio managers evaluating tactical overlays
- Educators demonstrating real-world behavior of theoretical positions
π§ Next Step
Would you be ready to dive in? You can start by exploring the Quick Start Tutorial guide to configure your first test and run your first simulation.
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