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Best Backtesting Tool

Discussion in 'Options' started by AKJ, Nov 22, 2015.

  1. AKJ

    AKJ Well-Known Member

    Hello all, my first post in the forum!

    I've been trading some weekly calendar strategies with some mild success over the past few months, but want to take my trading to the next level and conduct some thorough backtests of various strategies and adjustments.

    Looking for recommendations for best/most cost effective backtesting tools for options strategies. In addition to continuing the weekly calendar on SPX/RUT, I'm hoping to add the Bearish Butterfly as a monthly trade. Trading ~$30k, so will be unable to spend a whole ton on a platform or service.

    Thanks for the recommendations
  2. GreenZone

    GreenZone Well-Known Member

    When you say "backtesting", you'll need to distinguish between backtesting a technical analysis strategy versus backtesting an options strategy (which will typically be delta neutral).
    From what you've said, it sounds like you want to backtest options strategies.
    If so, then the current tool which is perhaps the most popular is QuantyCarlo:

    The crew from Optionet Explorer are also working on an options backtesting tool, but I don't expect that to become publicly available for another few months.
  3. AKJ

    AKJ Well-Known Member

    Hi Ron,

    You are correct. I am looking for a tool that will have historical end-of-day, and if possible, intra-day Option and Index pricing data. With that data, I am hoping to test Option strategies that follow certain conditional rules, like the types of rules I outline below:

    1) Enter trade on certain day each week or each month (number of days to expiration).

    2) Adjust trade when certain conditions are hit. Conditions may be related to (a) price of underlying, (b) Net delta of position (or net of some other greek), or (c) Ratio of Delta/Theta (or some other combo of position greeks)

    (3) Close trade when certain profit target or max loss is reached.

    From what I have read, I was getting the sense that OptionVue could do this type of thing. Similar impression with ONE. From your experience, is QuantyCarlo superior to these other available tools? This may be a completely loaded question, but what tools does John Locke use to develop his systems? I am hoping to utilize the same tools to test some of my own variations.
  4. Challenger

    Challenger Member

    OptionVue has the back trading capabilities for all of what you described above and it is what John Locke used to develop his trading systems. I used it extensively to back trade the M3, one of John's strategies and it really helped accelerate the learning process. I also had the same concern about the cost so I initially signed up on a month by month basis (about $100 / month). They offer a 14 day trial period but they were very accommodating and extended that trial period for me.
  5. Bud

    Bud New Member

    tHi Andrew and Challenger,

    I've been considering John Locke's training program but a bit apprehensive about the costs. Tried checking online for reviews but couldn't find anything helpful. Since you both mentioned his name and strategies I was wondering if you'd have any feedback that you are willing to share. Is Locke's market neutral income programs course worth the costs of about $1000 or so? Are you guys winning more than loosing and remaining cash flow positive consistently following his strategy? Dos his strategy and recommended tactics work? Any feedback would be greatly appreciated!
  6. GreenZone

    GreenZone Well-Known Member

    Bud, if the cost is an issue for you, then I'd suggest starting with Brian Larson's Rhino.
    Brian explains the full trade plan rules within the recording, right here at CapitalDiscussions.
    On top of that, Brian is also running an advisory service, so you can just pay per month to trade along with how he trades it himself.

    The Rhino is similar to John Locke's "unhedged M3" (M3U), so it will act as a good intro to the John Locke style of trading.
    After that, if you want to get into the John Locke trades, then the normal progression is:
    1) Super Simple Spreads
    2) Bearish Butterfly
    3) M3

    That will take you a good 6 to 12 months to get through and practice live.
    After that, you can move onto the more advanced John Locke trades......or just stick with the above.
  7. Bud

    Bud New Member

    Hi Ron- thank you so much for your guidance. I appreciate your quick reply/suggestion I will definitely listen to Brian's recording and see what I can pick up. I don't have any problem following an advisory service and make a few bucks but I'd feel comfortable if I can learn to do it myself and therefore I was wondering if Locke's program is worth the costs. Of course, I understand it all comes down to the ability of the student and his/her ability to grasp the subject and execute but still wanted to get some feedback from the people that tried his program.

    Ron, is SSS the bull credit spread on RUT or some index with no adjustments? Was wondering if you can share any insights on this.
  8. AKJ

    AKJ Well-Known Member

    Hi Bud,

    I am in the same camp as you, I have not purchased any programs.

    I have cobbled together some foundational principles from my own trading and what is out there on youtube, and am searching for an efficient means to backtest. If I find that my own creations do not perform up to my expectations, then I may choose to invest in a program at a later date.

    To be perfectly frank, I would rather not trade a system that entire online communities are trading; don't want to be bidding up the price everytime I want to enter, adjust, or exit a trade. Looking to develop variations that allow me to trade the same principles and capture the same edge, but without having identical mechanics.
  9. GreenZone

    GreenZone Well-Known Member

    Andrew, here's how I see it....
    I hate trying to re-invent the wheel.
    I would much rather start with an existing proven system, learn it, and then from that point, it then becomes much easier to create your own variation.
    Getting a good foundation will really help you out.

    Learning the adjustment concepts within the M3 trade will really help you out.
    Having said that, the M3 is a relatively complex trading system for a newbie, so it's much easier to first do the Super Simple Spreads followed by the Bearish Butterfly, prior to getting to the M3.

    Again, if you don't want to spend the money in purchasing the John Locke courses, then starting off with the Rhino is an excellent (and free) option.


    Bud, the Super Simple Spreads course from John Locke consists of:
    a) "The Bull": a simple put credit spread system
    b) "The Bear": a bearish butterfly system
    c) "The Bull vs Bear": a trading system which combines both "The Bull" and "The Bear" within the same position
    d) "V-Condor": an iron condor with an embedded straddle/strangle
  10. Bud

    Bud New Member

    Thanks Andrew for your input.

    Ron- again, thanks for your additional insights.
  11. Rick

    Rick Active Member

    in these two videos from John's "Financial Freedom Classroom" you can get the idea of the Bull trade and the Bull vs Bear.
    A trade that historically out performs the S&P 500 and most mutual funds? :

    Phase 5 Mutual Funds VS Super Simple Spreads with John Locke:

    Jay Hattler and uwe like this.
  12. Andrei

    Andrei Well-Known Member

    I would not worry about competing against other M3 and BB traders. Most people here trade with TOS and I have never seen any Butterflies volumes on their Spread Book that can potentially move the markets. Even at 56 days to expiration strike prices are somewhat different. And on the exit side, everyone is trading differently.

    I would rather not pay $800 - $1000 annually for a program, but I see no other way to track, re-play and back-test my trades.
  13. AKJ

    AKJ Well-Known Member


    I attempted to sign up for QuantyCarlo, but received a message that they are shutting down the tool retail access and considering only strategic partnerships with institutional money.

    Has anyone else received this message?
  14. tom

    tom Administrator Staff Member

    Hi Andrew,
    QuantyCarlo is indeed closed for retail access as they are using the tool internally for a private hedge fund.
  15. Andrei

    Andrei Well-Known Member

    ONE is working on an automated back-testing system. Not sure when they plan to release it, but they may be the only game in town now.
  16. runmael

    runmael Member

    Hi everyone!
    I was wondering how many of you backtest your trades and which tools do you use? Is there anything in particular that bothers you about your backtesting process?

    Thank you for your insights! :)
  17. AKJ

    AKJ Well-Known Member

    Yes! The fact that the tools I currently have access to only support manual backtests (click through days yourself and make the adjustments as opposed to automatically cycling through days and adjusting based on rules) is quite frustrating. Hopeful that ONE comes out with this functionality in the future.
  18. TheSpeculator152

    TheSpeculator152 Well-Known Member

    There does exist tools out there that can help you automate options back testing but I would only advise experienced traders to use those.

    Trading psychology, Greek trends, etc. is easily overlooked with automated back testing and to be confident in trading a new strategy, I would personally only do so after having manually back traded it for several years.

    I think automated back testing primarily belongs to high frequency trading. If you are doing M3 or SST, then it is easier to do manual testing while simultaneously developing confidence in the strategy and your execution skills.
    vega4mike likes this.
  19. AKJ

    AKJ Well-Known Member

    Can you help direct me to some of these tools? I am very interested in finding a good one to support in strategy development.
  20. TheSpeculator152

    TheSpeculator152 Well-Known Member


    Will be interested to learn what you think of them.
    Last edited: Mar 24, 2016

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