backtesting bond options strategies

Discussion in 'Options' started by spec77, Apr 18, 2017.

  1. spec77


    Hi all,

    I want to backtest some strats on bond options (ZN and ZB). Before buying expensive data and investing considerable time and resources into it, I’d like to do some quick tests of my investment thesis


    -does it make sense to run backtests on ETFs like TLT and IEF (have data for them ready) ?

    -next step would be to use historical vol surface. Just looked at Quandle and unfortunately they don’t have vol surface for ZN and ZB. Do you know of other data providers ?


  2. Bond futures vol is quite tricky, especially in the US. I am not eve sure that BBG does a good job with those.

    I imagine ETF options might actually be easier, although I am not an expert by any means.
  3. spec77


    yes I think it's easier to backout vol from ETFs.

    My main concern is once I develop a strat using bond ETFs, not sure if I can use it on futures options and still expect the same returns
  4. You shouldn't expect same returns. Similar, in some aspects, maybe, but not same.
  5. sle


    It's the opposite. You would be backing implied vol out of American options on a product with a complex dividend term structure (plus, there are other complications there due to the nature of the ETF). Doing it on bond futures and correcting for CTD-related issues is actually easier.