Okay, so let me go over briefly how I backtest using OptionNET Explorer and just kind of the process that I go through. Let me show you something I think is interesting. You can see all these systems right here that I’ve backtested. Look at how many of them there are. I mean, each one of these has its own multiple-multiple backtests inside of each one of these potential systems that I’ve backtested. So you can just see how many of them are here. It’s just a lot of backtests that I’ve ran.
Okay, so we’re in this particular account right here this 20 6 Fly, and so I’ve already ran backtests in this, and I’ll just pick some random dates. Now, one of the things is you want to make sure that you have the correct underlying. If I put like Macy’s in here, for example, there’s nothing there because I didn’t backtest Macy’s in this particular account called 20 6 Fly in January of 2018, so there’s nothing there’s nothing there.
But if I put $SPX, which is an underlying that I did backtest, there’ll be something in there. There’s already something there so I’m going to figure out when did this trade actually start. Well, I hit this thing and it takes me back to the last adjustment. I hit it again and it goes like, you know, [until] it says there’s no previous adjustments then I know this is where the trade started. So this trade started on December 20th, 2017, at 7:35. That’s when I put this on for a backtest.
I mean, so I just basically went in to do that. I can press this right here, right, and it’ll take me to where it is in here. Boom. So right here, here’s the calls on the side, and then down here are the puts. So I actually purchased one of these $2,635 calls; I sold one of these $2,605; and I sold a $2,605 here on the puts; and I bought one at $2,655.
So here’s what I did to do that. I put -1 to sell it. I put +1 to buy. I went right here put -1, and I put +1. Okay, now the way I did that was I [clicked] start new trade. So this is the trade now. This trade has not been committed. In order to create this trade I need to hit commit and I need to call it something. Let’s just call it ‘test,s o this trade is created as a test. So now there’s two trades. There’s the previous test, backtest, that I did it [ID #] 5595 and then this new one which is [ID #] 9995 backtest. I’m almost to 10,000, but they’re the same trade because I copied it, right, but you saw how I put that in, and there it is now.
What do I do from here? Well, I want to know how this performs in the future and I might have some rules. Let’s just say, I’ll just make up some rules. I’ll say the trade can’t go longer than 30 days; and my profit target is $50; and if I’m down $200 I’ll get out; and if my Deltas are +3, I’ll make an adjustment; and if they’re -3, I’ll make an adjustment. Okay, so I’m going to be looking at the P&L; I’m going to be looking at the Delta of the position; all these positions combined; and I’m going to be looking at how many days in the trade; and I’m just going to go the next day.
Now, here’s the thing, I’m not going to look at it every five minutes. I’m just going to pick a time during the day that’s reasonable and I’m going to look at it at the same time every day. But I’m going to be able to know, if I take this and drag it, each one of these little dots represents five minutes. But this is the high of the day, look at that. It was up $23 at the high and down, I’m looking over here, and down $33 on the low. So this side right here is our P&L on the right and the left and then over here is the price of the underlying, right. So each one of these little dots is five minutes. So if I move five minutes, you’ll see that I’ll move to a different dot every time. So you can see what happened every five minutes. But I don’t really care what happened every five minutes, I just want to know how high was my profit.
So this one was, you know, $17 and my lowest was $31. So I’m looking at what was my high what was my low. And then what was my Delta; and I’m just looking at my Delta for whatever time I use. So we’re at 8:20 in the morning, so I’ll go to the next day, and I’ll just keep it at 8:20 in the morning. Okay, so my high was $37 and my low is $24, and my Deltas are fine. They’re not higher than +3 or lower than -3, and I’m not 30 days in the trade. So based on the rules, I’m good.
I’m going to go the next day. This is a holiday. That’s why it’s in red. That’s why nothing changed, so I’m going to go to the next day. And I’m just going to look at it at the same time every day because I can see everything I need to see. $26 and, you know, $42. Delta’s still good; not 30 days in the trade. So I have a series of questions that I ask myself every day.
Okay, did I go above $50? No. [Did] I go below $200? No. Is my Delta above +3? No. iIs it below -3? No. Am I 30 days in trade? No. So I answered “no” to all five questions. Go to the next day until I answer yes. Okay, so the answer is no, no, no, because I’m not above $50; not below $200; Deltas are good; not at 30 days. Okay, I can see it. I don’t even have to–like it’s just obvious at this point, right. Here’s a holiday. Okay, nothing going on there. Nope. Look at that, almost kind of made its way up to $50. But you want to make sure there’s at least like five dots above or right at 50 to really believe that you hit profit, and that your order would be filled.
Okay, nothing. No. I mean, it went to +50 at one time and -58, but that’s not enough to say it got filled there. It just popped up there real quick and came back down. It hit the 50 for profit but it never filled. So you just go to the next day. 19 days, are we 30 days? No. Okay, we’re still good. How about Deltas? No. Positive +3, negative -3? Nope. Yep, there’s your $50 mark, your $200 mark, nope. Nope. Looking at the Deltas, P&L, days in trade.
See right here we got a couple dots above $50, but that never got filled. That was just a quick little bump up. Now, if it was like here, where $37 was my profit target and these little [dots] lumped around here above $37, I’d say yeah I hit it. I hit it. No, Delta’s good; profit target not hit; 23 days. Looks like we had another holiday. 27 days. Looks like a weekend. Accumulated around the $30 mark. No. 28 day 28. Nope, we’re not below $200, not above $50. Deltas are good. Look at Delta’s, getting a little higher, but, you know, had a little looks like it was down over $100 today, at some point within some five minute marks, but never went below $200.
30 days in trade, okay. So we didn’t get below $200, we didn’t get above $50. So, and our Deltas are good, but one of our rules was don’t go past 30 days in trades. So we would exit out of this trade because it’s 30 days, but let’s continue and see what happens. Day 33. Day 34. Day 36. Day 40. Day 41. 42, not bad; getting close to the end of the trade because it’s going to die. It’s going to expire. It’s going to hit this expiration line. 44. Look at this, it’s just going to probably end up here. I’m going to take it to the end. It says that is the end. So you take it to the end, like this, and then you got to go back five minutes. There it is. This is when this particular trade ended. So hopefully that clears up a lot of things about how to backtest on OptionNET Explorer.
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LINKS MENTIONED:
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