❓What is the Option Backtesting Tool?

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.

🚀 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

🧠 How It Works

At its core, the tool takes your defined option structure and walks through time, executing simulated trades based on your parameters:

1. Structure Setup – Define the legs of your strategy (e.g., short 25-delta put, long 5-delta put)
2. Rolling Rules – Choose when and how to roll positions (e.g., at 30 days to expiry)
3. Signal Filters – Apply entry/exit logic based on external indicators or price behavior
4. Performance Tracking – Track equity curve, trade logs, and profitability over time

🛠 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

📈 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

🧭 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.