Option historical testing

F

FLfutures

Most recent discussion re option testing was several years old, so thought I'd begin anew.

I'm interested in a software product to back test individual stock option strategies, including stock writes (both calls and puts.)

Would like software to be able to run thru trading rules, on 100-500 stocks, and show summary statistics, for a 1-5 year run.

Suggestions appreciated.
 
Contact the specialized data vendors. ivolatility, livevol, orats. You may have to program a roll-your-own solution.
 
Since most option markets are quite wide, what price do you use for back testing? Do you assume you have to take offers and hit bids or do you use the midpoint?
 
xandman said:
Contact the specialized data vendors. ivolatility, livevol, orats. You may have to program a roll-your-own solution.
More...

Thanks, but looking quickly, neither ivolatility nor livevol has backtesting captabilities; I'll check-out orats' Implementor.

Anybody have, or know of a proprietary software product, either for sale, or lease?

Thanks again.
 
rmorse said:
Since most option markets are quite wide, what price do you use for back testing? Do you assume you have to take offers and hit bids or do you use the midpoint?
More...

Any decent back testing platform should have ability to use any price, in addition to slippage. Initially, I'll probably test closing prices, with slippage. For active indiv stks, esp in, or near the money, closing prices should be reasonably close to real-world executions.
 
FLfutures said:
Thanks, but looking quickly, neither ivolatility nor livevol has backtesting captabilities; I'll check-out orats' Implementor.

Anybody have, or know of a proprietary software product, either for sale, or lease?

Thanks again.
More...

I was actually leading to that without being a naysayer. I still hope somebody surprises us with a solution.

Not knowing your specific strategy, the minimal amount of historical data points to conduct your backtest costs a fortune. The specialized data vendors as far as I know have historical market scanners. So, you would still have to output this information and calculate possible return statistics.

Definitely, no concrete execution stats as @rmorse may have been leading to. And that's the killer in this business.
 
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You may find that for weekly options on penny pilot stocks or for options to expire in less than two weeks, that the midpoint is close to fair value. Most options are too wide or the midpoint may not be "fair value." Closing prices are typically NBBO bid/ask average. I'm not as confident as you are that getting pricing data this way is as meaningful as you expect.

xandman suggested ivolatility. ivolatility is not a bad place to start. They do offer the data you are looking for and can likely suggest a service that is compatible.

http://www.ivolatility.com/data/historical_data2.html

good luck...Bob
 
rmorse said:
You may find that for weekly options on penny pilot stocks or for options to expire in less than two weeks, that the midpoint is close to fair value. Most options are too wide or the midpoint may not be "fair value." Closing prices are typically NBBO bid/ask average. I'm not as confident as you are that getting pricing data this way is as meaningful as you expect.

xandman suggested ivolatility. ivolatility is not a bad place to start. They do offer the data you are looking for and can likely suggest a service that is compatible.

http://www.ivolatility.com/data/historical_data2.html

good luck...Bob
More...

Thanks.

1. Planning to use options that expire within 2 weeks, and
2. Willing to limit initial testing to say 200 stocks, picked from from SP 500 and NAS 100.

So, closing prices, with liberal slippage, should be decent for testing purposes. (Having spent number of years -- albeit 15 years ago -- working with system trading in futures, one's worst drawdown is always ahead, so back testing is just a starting point.)

Considering my stock and option data guidelines above, I suspect fairly clean data is available for maybe $2,000-$4,000, including many option months I will not use. The rub is more likely the quality and robustness of the back testing platform, including learning curves.

I'd also consider working with someone knowledgeable in this area, with extensive knowledge of a particular back testing platform.

BTW, the fact that option back testing platform, and/or data, are not readily available, makes me think it a worthwhile endeavor.
 
I'll ask around to see if I can find something that fits. I'm sure they are out there. The last time someone asked me to find something for them, the platform was $5000/month and was so expensive to maintain that I think that company dropped the product. It was called Silexx Timebend.
 
rmorse said:
I'll ask around to see if I can find something that fits. I'm sure they are out there. The last time someone asked me to find something for them, the platform was $5000/month and was so expensive to maintain that I think that company dropped the product. It was called Silexx Timebend.
More...

Thanks. $5,000 per month would be way overkill for my purposes. It sounds like the platform, and the maintenance you reference, is likely due to maintaining 5-10,000 symbols, with years of intra-day data, probably in a SQL database, or similar.

On the other hand, a $5,000 per month platform, say 5 years ago, is probably available for close to $1,000 or less today.
 
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