Take the 2-minute tour ×
Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. It's 100% free, no registration required.

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).

share|improve this question
1  
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. –  mike dell Mar 19 at 23:50

4 Answers 4

up vote 12 down vote accepted

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/.
share|improve this answer

Unlike backtesting stocks or futures, backtesting multi-legged option spreads does have its unique challenges.

One way to backtest your options strategies is to download historical option data (Market Data Express) and use a technical analysis Excel plugin (TA-Lib). You can then create an Excel spreadsheet to automatically enter / adjust your spread trades as certain technical conditions are hit.

A better way is to use an automated options backtesting software, such as (OptionStack). Using this tool, you can create rules to automatically enter and adjust your option spreads as market conditions change. In fact, you can backtest years of complex option spreads (collars, condors, etc..) in seconds.

However, this software is currently in beta and there appears to be a sign-up waiting list.

share|improve this answer

There's nothing fundamentally different between options and cash instruments, so you really just need a backtesting platform that has good functionality for backtesting multiple instruments simultaneously with the same reference time frame.

I'm assuming that you're looking for something halfway between in terms of level of sophistication and cost required to upkeep. One such tool that comes to mind is Deltix.

share|improve this answer

There is one more solution available now to backtest option strategies: www.oscreener.com!

This tool allows to screen and backtest bull put spreads, long calls, short puts, debit spreads etc and validate these strategies in seconds.

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.