Backtesting
Test strategies against historical data
Test your ideas against historical data. See what would have happened.
Availability: Vega plan ($99/month)
Important: Backtesting results are hypothetical. Past performance doesn’t guarantee future results.
Three Backtesting Engines
| Engine | What It Tests |
|---|---|
| Flow Backtesting | React to unusual options activity signals |
| Strategy Backtesting | Multi-leg strategies (spreads, condors) |
| Chain Backtesting | Signals from chain metrics (IV rank, Greeks) |
Flow Backtesting
Test strategies that trigger on unusual activity.
Flow Types
| Type | Description |
|---|---|
| Whale Activity | Large premium trades |
| Aggressive Buying/Selling | Ask/bid-side urgency |
| Volume Spike | High volume vs open interest |
| IV Spike | Unusual IV increases |
| Sweep Activity | Multi-exchange sweeps |
| Unusual Score | ML-driven scoring |
Parameters
- Stock: Symbol to test
- Date Range: Test period
- Position Size: % of portfolio (max 25%)
- Holding Period: Days to hold (1-30)
- Min Score: Unusual score threshold
- Stop Loss / Take Profit: Risk management
Strategy Backtesting
Test defined options strategies.
Available Strategies
| Category | Strategies |
|---|---|
| Single-Leg | Long Call, Long Put |
| Vertical Spreads | Long/Short Call Spread, Long/Short Put Spread |
| Iron Strategies | Iron Condor, Iron Butterfly |
| Income | Covered Call, Cash Secured Put |
| Volatility | Long/Short Straddle, Long/Short Strangle |
Parameters
- Strategy: Select from list
- DTE Range: Days to expiration for entries
- Width: Strike width for spreads
- Min IV Rank: Entry threshold
- Position Size: % of portfolio
- Stop Loss / Take Profit: Risk management
Chain Backtesting
Create signals from option chain metrics.
Available Metrics
| Category | Metrics |
|---|---|
| Volatility | IV Rank, IV Percentile, VIX 30D Rank, IV Skew Z-Score |
| Put/Call | P/C Volume, P/C Premium, P/C Open Interest |
| Greeks | Net Gamma, Net Delta, Total GEX |
| Advanced | Tail Risk, Max Pain Distance |
Example Rule
Enter when IV Rank > 50, exit when IV Rank < 30.
Performance Metrics
After backtesting:
| Metric | Description |
|---|---|
| Total Return | Overall % return |
| Win Rate | % profitable trades |
| Max Drawdown | Largest decline |
| Sharpe Ratio | Risk-adjusted return |
| Profit Factor | Gross profit / gross loss |
| Avg Holding Days | Time in positions |
Charts
- Equity Curve: Portfolio value over time
- Drawdown Chart: Decline periods
- Monthly Returns: Performance by month
- P&L Distribution: Trade outcomes
Trade History
Every trade logged with entry, exit, P&L, and exit reason.
Best Practices
- Conservative position sizes: 5-10%
- Always set stop losses
- Test multiple time periods
- Consider transaction costs (not included)
- Validate out-of-sample: Don’t overfit
Limitations
- Historical data availability varies
- Results assume theoretical execution
- Liquidity constraints not modeled
- Commissions/slippage not included
Remember: Backtesting is educational. It shows what might have happened, not what will happen. Paper trade before using real capital.
Related: Historical Analytics · Unusual Activity
