There are all kinds of tools for backtesting linear instruments (like stocks or stock indices). It is a completely different story when it comes to option strategies. Most of the tools used are bespoke software not publicly available. Part of the reason for that seems to be the higher complexity involved, the deluge of data you need (option chains) and the (non-)availability of historical implied vola data.
Anyway, my question:
Are there any good, usable tools for backtesting option strategies (or add-ons for standard packages or online-services or whatever). Please also provide infos on price and quality of the products if possible.
P.S.: An idea to get to grips with the above challenges would be a tool which uses Black-Scholes - but with historical vola data (e.g. VIX which is publicly available).
Answer
A few pointers:
- When I looked into this a few years ago, a good solution at the time was LIM's XMIM, which also has an S-Plus/Matlab interface. Whit Armstrong also provided an R package for this, although I don't know how complete it is. This provides both the data and the software for analysis.
- On the very high end (and expensive) side of the spectrum, OneTick and KDB are both being used for this purpose by professional money managers.
- Two tools used by the non-professional community are available from brokers: https://www.thinkorswim.com/ or http://www.optionvue.com/.
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