best way to backtest option strategies?

Discussion in 'Automated Trading' started by fredit, Nov 21, 2008.

  1. fredit



    i'm looking to backtest 2 strategies.. a long calendar spread (front month, next month) and bull call spread (front month).

    What would be the best tools to do this? I have Interactive Brokers as my paid service.. and I'm fairly well versed in it's API. or is there a free tool better suited ? ... my main concern is the cal spread testing (since it involves 2 months)

  2. Thinkorswim lets you backtest strategies and its ridiculously easy. When you load the software, its on the "thinkback" tab.
  3. cfelicio


    yes, although not automated, thinkback is the easiest way to do it. Make sure you doublecheck the results as sometimes it fails to load correctly (at least that happened twice with me).
  4. fredit


    this is very interesting guys!

    I think I can get by with this for a wile..

    Any automatted ideas?
  5. Sorry to burst your bubble: if you have to ask this then you are unlikely ready to trade.

    Backtesting is only one aspect of the testing discipline, there is a lot more to it and this is why most automated systems eventually fail. More often than not backtesting results in curve fitting a system.
  6. fredit


    interesting theory on (not knowing how to back test calendar spreads == not ready to trade)

    have you backtested that theory? I have a dozen buddies that don't know how to either and they have pulled in between 300%-10k% a year numerous times.

    Sorry to burst your bubble troll :p
  7. timbo


    bali is right. If you're backtesting option strategies, you're way behind; albeit newbie.
  8. fredit


    bali says: not knowing the best way to backtest cal spreads == not knowing how to trade

    you say: bactesting options isn't the way to go.

    Seems like you'll have 2 completely different points of view.. one is saying unless you know how to backtest, you shouldn't trade and you are saying backtesting is for people that are 'way behind'.. aka not applicable anymore. (behind the curve is an alt saying meaning the same)

    or are you just saying I don't have years of option trading under my belt.. aka 'way behind'? if so, a logical place to start for a new person is reading books and backtesting, wouldn't you agree? That's where my buddy that is in the top 50 traders of all times started.

    Anyways, please keep things on-topic here please.. if it doesn't help me, and you just want to blow steam about your week, please just email me at
  9. timbo


    You only found two? ATS and equity commitments differ. Go ask your rich buddy -- moron.
  10. fredit


    :) thanks for your help
    #10     Nov 21, 2008