IMO for backtesting options strategies this method is well good enough. This is "backtesting using an options pricing model based on real historical prices of the underlying", not "backtesting using real historical options prices".Quote from 2rosy:
You are suggesting to use BS over past underlying to calculate options prices where the volatility used is the underlyings historical vol.
the resulting dataset would be useless. How would that even be close to realworld data?
And since in real life volatility is not constant: one simply can use different volatilities (for example slightly increasing or decreasing, or recalc it at each bar) in the backtesting loop, ie. even that can be tested using the said approach, one just needs to do some programming...
