Options Backtester 101

If you trade options, you have probably tested a strategy live and hoped it would work. This often leads to losses because the strategy was never proven first. The free options back tester solves this problem by letting you test options strategies using historical data before risking real money. In this guide, you will learn how to use the free options back tester, how each setting works, and how to read the results so you can trade with more confidence and clarity.

What the Free Options Back Tester Is

The free options back tester is a tool that allows you to simulate options trades using past market data. Instead of guessing, you can see how a strategy would have performed over time using clear rules.

What You Need to Get Started

• The tool is completely free
• An account is required using an email and password
• All back tests are saved to your account
• The tool is designed for longer-term options strategies

The Back Test Dashboard

After logging in, you will see the dashboard. This is where all your back tests are stored and managed.

What You Can Do on the Dashboard

• View all back tests in one place
 • Sort by date, profit and loss, ticker, or strategy
 • Filter results for easy review
 • Delete back tests
 • Share back tests

If you have not run a back test yet, you may see a short tutorial video explaining how the tool works.

Creating a New Back Test

To start, click New Back Test. This opens the setup screen where you define every rule for your strategy.

Data Type and Timeframe

End-of-Day Data

The back tester currently uses end-of-day data only.

This means:

• About 15 years of historical data is available
 • Best for strategies longer than one day
 • Ideal for 45, 60, 90, and 120 DTE strategies
 • Zero-DTE strategies are not supported

All rules and indicators are based on daily price data.

Selecting a Ticker

You can run back tests on several supported tickers.

Available Tickers

• SPX
 • SPY
 • QQQ
 • IWM
 • GLD
 • DIA
 • AAPL

You can only test one ticker per back test.

Choosing a Date Range

You can select preset date ranges or focus on specific periods.

Common Date Range Options

• Last 1 year
 • Last 2 years
 • Last 5 years
 • Last 10 years
 • Last 15 years (maximum)
 • 2020 crash period

This helps you see how a strategy performs in different market conditions.

Building Your Strategy

Once your data and ticker are selected, you can build your options strategy.

Custom Strategy Builder

You can create a strategy with up to four option legs.

For each leg, you choose:

• Buy or sell
 • Call or put
 • How the strike price is selected

Strike Price Selection Methods

The back tester gives you multiple ways to choose strike prices.

Delta-Based Selection

• Selects options based on a specific delta
 • Commonly used for probability-based strategies

Dollar Amount In or Out of the Money

• Uses a fixed dollar distance from the stock price
 • Calls are placed above the price
 • Puts are placed below the price

Percentage In or Out of the Money

• Works like dollar selection
 • Uses a percentage instead of a dollar value

Offset From a Previous Leg

• Used for spreads
 • Defines spread width, such as $5 wide
 • Strike is based on another leg

Using Pre-Built Strategies

You can also select a pre-built strategy instead of creating one manually.

Example: Put Credit Spread

• Sells a put at 30 delta
 • Uses 45 days to expiration
 • Buys a put with a fixed offset

Pre-built strategies save time and reduce setup errors.

Entry Rules

Entry rules control when trades are opened.

Entry Frequency Options

• Daily
 • Weekly
 • Monthly
 • On signal

You can also restrict entries to specific days, such as only Wednesdays.

Entering at an Exact DTE

You can force trades to open at a specific number of days to expiration.

Why This Is Useful

• Prevents rounding
 • Keeps entries consistent
 • Improves accuracy in testing

Technical Indicators for Entry

You can require technical conditions before entering trades.

Supported Indicators

• Simple Moving Average (SMA)
 • Exponential Moving Average (EMA)
 • Relative Strength Index (RSI)

All indicators are based on daily price data.

Trade Filters

Trade filters help control which trades are allowed.

Credit and Debit Filters

• Set a minimum trade price
 • Set a maximum trade price
 • Example: only enter trades between $2 and $3

This helps avoid low-quality trades.

Exit Rules

Exit rules determine how trades are closed.

Profit and Loss Exits

• Take profit as a percentage of credit
 • Stop loss as a percentage of credit

Time-Based Exits

• Exit at a specific DTE, such as 21 days
 • Exit after a set number of days in the trade

Indicator-Based Exits

You can also exit trades using technical indicators.

Exit Conditions

• Price above or below indicator
 • Cross above or cross below

Advanced Exit Options

Trade Delta Exit

• Exit when total trade delta reaches a set level
 • Useful for managing directional risk

Re-Entering Trades

• Automatically enter a new trade after exit
 • Or wait for entry rules to trigger again

Account and Risk Settings

These settings control how the back test account behaves.

Starting Capital

• Choose any starting balance
 • Examples: $100,000 or $1,000,000

Max Open Trades

• Limits how many trades can run at one time

Max Contracts Per Trade

• Limits position size
 • One contract per trade gives more realistic results

Buying Power Rules

You can control how allocation is handled.

Options Available

• Respect max allocation per trade
 • Ignore buying power and use max contracts only

Handling Trades at the End of the Test

You can choose how open trades are treated.

End-of-Test Options

• Close trades to show final profit and loss
 • Leave trades open to see unrealized results

Commissions and Slippage

The back tester includes realistic trading costs.

Why This Matters

• Brokers charge fees
 • Slippage affects fills
 • Ignoring costs inflates results

Default values are provided but can be adjusted.

Ignoring Wide Bid-Ask Trades

You can filter out unrealistic trades.

Wide Bid-Ask Filter

• Skips trades with large bid-ask spreads
 • Improves accuracy and realism

Running the Back Test

Once everything is set, click Run Back Test.

Expected Run Time

• About 10 seconds per year of data
 • 5-year test: around 50 seconds
 • 10-year test: 1–2 minutes

Viewing Results

After the test finishes, the results page appears.

Performance Chart

• Interactive chart similar to TradingView
 • Shows account growth and drawdowns

Performance Metrics

Key metrics are displayed clearly.

Metrics Include

• MAR ratio
 • Sharpe ratio
 • Premium capture rate
 • Win rate
 • Max drawdown

Back Test Summary

A plain-English summary explains the results.

What It Covers

• Overall performance
 • Strengths and weaknesses
 • Areas for improvement

Trade Log

The trade log shows every trade taken.

Trade Log Details

• Entry and exit dates
 • Exit reason
 • Profit or loss per trade
 • Return percentage
 • Days in trade

Trade Breakdown

Each trade can be reviewed in detail.

Included Information

• Option contracts used
 • Entry delta
 • Price movement during the trade
 • Commissions and slippage
 • Close reason

Editing and Rerunning Back Tests

You can improve strategies without starting over.

How It Works

• All settings remain visible
 • Edit any rule
 • Click Rerun Back Test

Previous results stay visible for comparison.

Comparing Back Tests

The tool automatically compares results.

Comparison Metrics

• Performance
 • Win rate
 • Max drawdown
 • Overall returns

Organizing Back Tests

You can rename tests for clarity.

Renaming a Back Test

• Click the name
 • Type a new one
 • Press Enter

Exploring Public Back Tests

You can view strategies created by other users.

Search Options

• Filter by ticker
 • Filter by strategy
 • Minimum number of trades
 • Minimum test duration

This helps you find ideas and inspiration.

The free options back tester is a powerful tool for testing strategies before risking real money. It allows you to build custom strategies, set detailed entry and exit rules, and analyze performance with clear charts and metrics. While it currently uses end-of-day data, it provides deep insight into longer-term options strategies. If you want to trade smarter, start using the free options back tester and refine your strategies with confidence before going live.