Backtesting capabilities

In order to backtest a trading strategy systematically, there has to be a reason or signal to enter the trade and to exit the trade. These signals must be specific so the platform can create rules to be tested for designated symbols over specified time periods. The trading strategy, profit targets, stop losses and other similar features are tested against the original dataset of entry and exit dates that is created.
 
There are three ways to create a backtest:

• Import the trade dates on an Excel spreadsheet
• Create the dates manually
• Create the entry and exit criteria using a single indicator or a combination of indicators:
  • Candlesticks
  • Chart Patterns
  • Earnings
  • Custom Indicators (MACD, RSI, EMA, etc.)
  • Calendar based (Weekly, Monthly, Seasonally)
  • State Modeling
  • Implied Volatility
  • And more…

Stock Selection:
Backtests can be run on individual stocks, ETFs or indices or on a combination of any of the symbols.  The platform has default stock lists like the S&P 500 and a liquid options list and also allows users to create their own stock lists.  There are three ways to create a custom stock list for use in the platform.

• Import the symbols on an Excel spreadsheet
• Manually enter the symbols
• Create a custom list using a single or multiple indicators (Price, volume, open interest, etc.)

Selection of testing dates:

Testing dates for backtests can be customized for a specific time period or for the entire range of available dates starting from January 3, 2007.  Specific testing periods need to select a date range with one day increments, i.e. March 12, 2009 to December 30, 2011.

Option Strike Selection: 

• Delta: The user can select a range of delta between which the strike will be selected.
• Expected Move %: The user can select a strike above or below the expected move % for the option expiration selected.  
• Points from Current Close: The trader can select the specific points above or below the current close price.
• Strikes from Current Close: The trader can select the specific strikes above or below the current close price.  
• Targets:  The user can select above or below the State Modeling targets or stop loss level.  
• Standard Deviation: The user can select a strike above or below a factor of the upper or lower standard deviation. 
• Percentage from Current Close: The trader can select the specific % above or below the current close price.

For strategies with multiple option legs there are additional choices available:

• Minimum Points from Leg
• Exact Points from Leg
• Strikes from Leg
• Balanced
  
  

Option Expiration: 
Options Type: Weekly or Monthly expiration

Winning and losing trades can be closed or adjusted based on:
Profit Percentage, Loss Percentage, Trailing Profit Trigger, Underlying Price, State Modeling Targets, Position Delta, Custom Signal, Leg/Breakeven Parameters 
Profit and loss percentage are based off of: Current Risk, Initial Cost, Max Profit or Max Risk.                          

Trade adjustments:
Roll Out, Roll Up, Roll Out & Up, Convert to a different option strategy

Special Adjustments:
Close the trade after __ Trading Day(s)
Close the trade __ Days(s) before Expiration

Backtest reports include in-depth analysis of the trading strategy.  The overall run results will include calculations for win percentage, profit factor, efficiency and more.  Within the run results, users can view the individual trade results to include strike prices on entry and exit, daily profit-loss calculation and more.

Our single-click optimization allows you to find a sweet spot within minutes by quickly altering strike selection, profit targets, stop loss, adding in a secondary filter, utilizing a different trading strategy and more.  The optimal strategy can be quickly found by using over 20 different options trading strategies and the ability to compare each strategy’s results side by side. 

Secondary Filter

This section lets the user select a secondary confirmation filter utilizing State Modeling or a custom signal to test if the strategy can be improved or not with the additional entry criteria.