Backtesting

Study historical outcomes under explicit assumptions

What Backtesting is

Backtesting evaluates a selected condition or strategy against available historical data and presents modeled outcomes. It helps you compare ideas, inspect individual historical cases, and identify where a rule was fragile.

Backtesting is not live trading. Results depend on the selected period, available observations, contract liquidity, pricing assumptions, and exit rules. They do not represent the fills, commissions, margin, taxes, or portfolio effects you would have experienced.

Availability: Vega plan.

Backtesting areas

The Backtesting menu contains four user-facing areas:

The available fields on each form are the supported public controls. They can change as datasets and test types evolve, so use the form rather than relying on an old saved description of a parameter.

Create a run

1. Open the relevant area from Backtesting in the sidebar.
2. Choose the symbol set or universe offered by the form.
3. Select a historical start and end date.
4. Configure the visible condition, strategy, and risk controls.
5. Review the assumptions shown on the page.
6. Start the run.

Some runs finish immediately; larger runs can continue while the result page updates. Stay on the result page or return to your list later.

Option Chain Metrics

Chain backtests let you build a test from the historical measures offered in the form. Use this area when your question starts with a measurable chain condition rather than an individual options print.

Keep the first run simple. Test one primary condition over a broad enough period, inspect the individual outcomes, and only then add another filter. A highly specific rule can look strong because it produced very few observations.

Unusual Options Activity

UOA backtests start from historical activity that matched the selected user-visible filters. Use them to study what happened after comparable events, not to assume that every large or unusual trade had the same intent.

Review how many events were eligible, how many could be evaluated, and whether results were concentrated in one symbol or market period.

Options Trading Strategies

Strategy backtests model the supported option package over the chosen history. You can also build a package in the Options Strategy Builder and choose Backtest This Package to carry its selected legs into a custom strategy test.

Exact historical contracts and prices depend on data availability. Read the run’s assumptions and skipped-result notes before comparing its output with another strategy.

AI Trade Ideas

Trade Idea backtests let you choose an available idea family, period, and visible controls, then review how eligible historical ideas resolved under that test.

Use this area with the public Track Record:

• The public Track Record provides a standardized, nightly transparency view by model cohort.
• Your backtest explores the historical period and controls you selected.

The two can answer different questions and should not be expected to produce identical figures.

Read the results

Depending on the test type, a result can include:

• Run status and selected inputs
• Evaluated and skipped observations
• Outcome or return summaries
• Drawdown and risk measures where applicable
• Time-based and symbol-based charts
• Individual historical events or trades
• Explanations for observations that could not be evaluated

Start with data coverage. A strong percentage based on a small or concentrated sample is less informative than a stable result across multiple periods and symbols.

Compare tests responsibly

1. Change one important input at a time.
2. Compare multiple market regimes, not only the best recent period.
3. Reserve a later period or different symbol set for validation.
4. Inspect individual outcomes for data gaps and unrealistic assumptions.
5. Treat skipped observations separately from wins and losses.
6. Prefer a rule you can explain over one tuned to a historical chart.

Limitations

• Historical coverage varies by symbol, contract, metric, and date.
• Modeled execution can differ materially from a tradable fill.
• Bid/ask spread, slippage, commissions, early assignment, exercise, dividends, borrow, and margin may not be represented exactly as they would be at your broker.
• Corporate actions, halts, and changing market structure can affect comparability.
• Repeatedly tuning a rule to the same data can overfit the past.

All backtest output is hypothetical and educational. Past performance does not guarantee future results.

Related: Historical Lab · Unusual Options Activity · Trade Ideas · Strategy Builder