Backtesting
Monday, October 5th 2020
Technical Indicators And Volatility For Triggers In Backtesting And Scanning
Technical indicators like MACD, RSI and Bollinger bands and volatility indicators like constant maturity implied volatility can be used to drive options trading in backtesting and scanning.
Summary
Technical indicators like MACD, RSI, and Bollinger bands and volatility indicators like constant maturity implied volatility can be used to drive options trading in backtesting and scanning. ORATS provides a platform to use these indicators to backtest and scan, with a list of triggers available for use. The platform also offers consulting services.
Technical indicators like MACD and RSI can be used in backtesting and in scanning the current market to determine when to trade a particular options strategy. Further, volatility metrics can be used as rules for when to trade.
Here are the steps to use indicators to backtest and scan.
Go to https://wheel.orats.com/ and use your email to sign in and start a reduced fee trial.
Click ‘Create New Backtest’
Choose ‘Edit Additional Parameters’ and click Edit next to ‘Entry Indicator Triggers’:
Click ‘Edit’ next to the Contango trigger:
Click to use technical indicators or click on the dropdown to see the volatility indicators.
In the dropdown of technical indicators, the list of triggers are shown here:
Chaikin Oscillator, Average True Range, Bollinger Bands, Commodity Channel Index, Exponential & Simple Moving Averages, MACD, Relative Strength Index (RSI), and Parabolic SAR are available technical indicators. These can be used for the current symbol of the backtest by leaving the ‘symbol’ input box blank, or can be applied to a different symbol.
Using our regular indicators by clicking the orange link brings up our large list of volatility related criteria. These indicators can be use alone with a minimum and maximum or in a ratio with other indicators.
For example below, in selling a way out of the money covered call backtest strategy, the indicator showing the implied volatility of the 5 delta at the 10 calendar day constant maturity divided by the 75 delta ratio when above 1 can be used to trigger a trade
There are endless numbers of triggers to try.
Here are a list of the volatility related ones:
Our new Scan functionality searches for these relationships in the current market. To find the backtest you just set up, go to Scan, Add Scan, Your Backtests and the backtest with the indicator triggers will be run and applied to the symbols you enter or paste in the symbols area, no matter if the backtest was applied to these symbols or not. This way you can find the symbols that meet the indicator triggers you have set up.
You might find these backtesting links helpful:
Here's a recent blog post on backtesting:
We also offer consulting services.
Disclaimer:
The opinions and ideas presented herein are for informational and educational purposes only and should not be construed to represent trading or investment advice tailored to your investment objectives. You should not rely solely on any content herein and we strongly encourage you to discuss any trades or investments with your broker or investment adviser, prior to execution. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. Option trading and investing involves risk and is not suitable for all investors.
All opinions are based upon information and systems considered reliable, but we do not warrant the completeness or accuracy, and such information should not be relied upon as such. We are under no obligation to update or correct any information herein. All statements and opinions are subject to change without notice.
Past performance is not indicative of future results. We do not, will not and cannot guarantee any specific outcome or profit. All traders and investors must be aware of the real risk of loss in following any strategy or investment discussed herein.
Owners, employees, directors, shareholders, officers, agents or representatives of ORATS may have interests or positions in securities of any company profiled herein. Specifically, such individuals or entities may buy or sell positions, and may or may not follow the information provided herein. Some or all of the positions may have been acquired prior to the publication of such information, and such positions may increase or decrease at any time. Any opinions expressed and/or information are statements of judgment as of the date of publication only.
Day trading, short term trading, options trading, and futures trading are extremely risky undertakings. They generally are not appropriate for someone with limited capital, little or no trading experience, and/ or a low tolerance for risk. Never execute a trade unless you can afford to and are prepared to lose your entire investment. In addition, certain trades may result in a loss greater than your entire investment. Always perform your own due diligence and, as appropriate, make informed decisions with the help of a licensed financial professional.
Commissions, fees and other costs associated with investing or trading may vary from broker to broker. All investors and traders are advised to speak with their stock broker or investment adviser about these costs. Be aware that certain trades that may be profitable for some may not be profitable for others, after taking into account these costs. In certain markets, investors and traders may not always be able to buy or sell a position at the price discussed, and consequently not be able to take advantage of certain trades discussed herein.
Be sure to read the OCCs Characteristics and Risks of Standardized Options to learn more about options trading.
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