A Simple Backtest
This will be a backtest which will be simple for you to do. It assumes that you have already installed OptimalTrader, and that you let it download some option history. During your
free trial of the software, you will also be given a free of our
end of day service. So you should have at least five weeks of data available for back testing.
Start OptimalTrader and locate the system date on the bottom row of the application. By default, OptimalTrader will display the most recent trading date. Click on the left arrow to go backwards one day at a time, or click on the drop down box to select a date. Select a date at least two weeks before the most recent expiration date. Select a date before the first of the month. For this demo, we will select the Monday after the previous Friday's expiration.
Click on the tab that says "Chain". Type in the underlying symbol of what you wish to back test. For this demo, we are looking at SPX. During the recent days before this date, SPX had bounced and was becoming slightly bullish. So we don't believe that it is going to go any lower, but we are not sure how high it will go. So for this demo, we are going to create a Bull Put credit spread by hand.
On the top of the Chain page, enter SPX and click on the View Chain button. Rows of option data should fill the grid.
We are going to build our trade by hand. We want to sell a 845 put just below the current price of SPX, which is near 850, and then buy another put a little bit below it at 830. Since SPX has many options to choose from, we will leave a gap between the two.
To build this trade, scroll down to the puts that expire at our next expiration date. Click on the put just below our current price, and then right click on the row. This will copy this option's row down to the Build A Trade section of the page. Then choose another put option, with a lower strike, by clicking on the row first, and the right clicking on the row to copy it down to the Build A Trade section.
Now we have two rows of data in the Build A Trade section. Change the quantity of the higher strike to negative one (-1) by clicking on the Quantity column of its row and editing the text.
Once the trade has all of its rows and quantities correct, click on the "Copy To Risk Graph" button. This will change the current page to show the "Risk Graph" page. You should see your trade and risk graph on the page.
To view the history of this trade, just click on the right arrow of the System Date at the bottom of the application and watch the trade change. The prices show what the trade looked like at the end of each day. If you what to advance more quickly, click on the drop down box for the date and jump to a date near expiration and see how your trade did.
This ends our simple back test. We hope you enjoy our software.