Backtesting Options Strategy?

Discussion in 'Options' started by marshg, Jan 9, 2007.

  1. marshg


    I was wondering if anyone can recommend an accessible way to backtest an option strategy[ies]? One type explores the relationship between VIX and OEX [XEO] and the other OEX and large S&P stocks [seeing if there's a way to take advantage of the tighter premiums on the OEX]?
    Any leads would be much appreciated [no, I don't have Trade Station or any special software (I am a customer at Think or Swim)].
    PS: If someone has software that can do this and is willing to do it for a reasonable fee, I'd like to be in touch.
  2. kny3


    Hey Marshall.

    VIX is based on the S&P 500, VXO on the 100(OEX). Although they track pretty close, it might be worth your while to track VXO if you're looking at the OEX. Historical data goes back a long ways on VXO.

    kny 3 :cool:
  3. Keep in mind that VIX and VXO are computed in dramatically different ways.

    VIX should have history going back to the inception of VXO (they back-computed it using the new formula)
  4. marshg


    thanks! good pt; though the VXO and VIX historically seem to correspond pretty closely. [And actually the research I've done has been based on VXO and OEX prices--it's just a bit crude based on an excel spread sheet I've set up].
    I know the movements of the OEX and VXO aren't totally correlate, but it seems they are enough on big down moves esp. that there's some potential to set up hedged trades between the two--at least that's what I'm trying to establish.
    thanks again,
  5. Only way would be to import historical options data into a stand-alone backtesting program (not tradestation). Challenge might be any contract adjustments made in the past, if so (don't know right now.)

    PM me if interested.
  6. kny3


    Hey Marshg

    one other thing to think about. If you are testing strategies around the VIX and OEX, don't forget there have been cash settled VIX options for the last year and VIX futures for the last 2. 2k futures and 21k options traded yesterday.
    More work for you. I love handing out additional homework.

    kny 3 :cool: