Does the Emergence of Backtesting Software Make It Easier to Make Smarter Options Trading Decisions?

Image Courtesy of tastytrade

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Smart investing is not for the faint of heart. We all need help in making sound financial decisions and that includes software that can mine information proving to be the difference between intelligent and unsavvy investment strategies. The emergence of option backtesting software gives investors a new bank of information that is helping them weave their way through the sometimes perilous waters of options trading. 

Backtesting simulates an investment strategy using historical data to test how well your plan would have worked in the past. Several tools exist for backtesting stocks or stock indices, but until recently, few tools to research historical option strategy data have been publicly available. 

Again, part of the reason for this is the incredibly high complexity involved. Option strategies are complex, and the data tends to be voluminous and cost-prohibitive, which is one of the reasons why so few backtesting applications exist. 

One disruptive company has not only entered the backtesting market, but online financial network tastytrade is offering it for free. The company, which presents trading education and market coverage through its wide swath of online, live, daily content, has announced the launch of lookback. The company’s new backtesting tool, lookback, provides what it refers to as a “risk-free” environment to test option trading strategies.

Head of Research and Development for tastytrade, Michael Rechenthin, explained that “lookback lets you see the past profitability of a strategy, but also does thousands of simulations to see what to expect in the future — all within seconds.”

The lookback platform lets traders test ideas without the stress of putting their money at risk. The tool is meant to help investors see how well a strategy performed in the past while also understanding the risk associated with that particular strategy. With lookback, traders can access everything from forecasted profit and loss graphics and metrics to the theoretical probability of a stock landing above or below any price up to expiration.

“What’s really cool about this platform and what makes it unique is that we’re not limiting you to recognized strategies,” says tastytrade co-founder and co-CEO Tom Sosnoff, who is also co-founder of thinkorswim, a top Robinhood HOOD competitor recently acquired by Charles Schwab SCHW. “Free backtesting tools that cover virtually any option strategy and any underlying are simply non-existent; lookback is a great research asset for traders.”

Founded in 2011, tastytrade currently streams live 7 days a week—including 8 hours of original programming every weekday—sharing financial information, investment strategies, and entertainment related to options trading and the market. Its investment in lookback is a new direction for the company—an interactive software to support your trading. And it’s not just for beginners. Lookback offers many features for more advanced traders, including Greek and risk analysis and tastytrade metric-specific backtesting configuration that lets you modify strategy parameters to check performance and analyze single or multi-leg positions.

Traders interested in signing up for the lookback software can find more information at tastytrade.com/lookback.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.