Are there any good tools for back testing options strategies?

  • There are all kinds of tools for backtesting linear instruments (like stocks or stock indices). It is a completely different story when it comes to option strategies. Most of the tools used are bespoke software not publicly available. Part of the reason for that seems to be the higher complexity involved, the deluge of data you need (option chains) and the (non-)availability of historical implied vola data.

    Anyway, my question:
    Are there any good, usable tools for backtesting option strategies (or add-ons for standard packages or online-services or whatever). Please also provide infos on price and quality of the products if possible.

    P.S.: An idea to get to grips with the above challenges would be a tool which uses Black-Scholes - but with historical vola data (e.g. VIX which is publicly available).

    Is there any automated software for backtesting complex option spreads, like collars / iron condors / butterflies? For instance, I would like to backtest the 10-year historical performance of entering a collar whenever the 50 day MVG crosses above the 200 day MVG and rolling the short call whenever the underlying stock crosses above the short strike. I looked at the other tools above and 1) they either didn't support the option strategies I want or 2) they would require me to manually enter and exit the positions. The latter is just too time consuming.

    I've been building a tool for back-testing option strategies at https://www.getvolatility.com. It 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 historical data. It has detailed historical implied volatility, skew, and surface charting. The historical data goes back about seven years and will go back farther soon.

  • Shane

    Shane Correct answer

    10 years ago

    A few pointers:

    • When I looked into this a few years ago, a good solution at the time was LIM's XMIM, which also has an S-Plus/Matlab interface. Whit Armstrong also provided an R package for this, although I don't know how complete it is. This provides both the data and the software for analysis.
    • On the very high end (and expensive) side of the spectrum, OneTick and KDB are both being used for this purpose by professional money managers.
    • Two tools used by the non-professional community are available from brokers: https://www.thinkorswim.com/ or http://www.optionvue.com/.

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Content dated before 7/24/2021 11:53 AM