Backtesting Using Staggered Trades for Smoother Results

Options backtesting using staggering trades can help smooth and improve the consistency of backtests, especially long-dated expirations. Here's how to put this technique in your trading strategy.

Summary

Staggering trades can help smooth and improve the consistency of backtests, especially in options strategies with long days to expiration. ORATS offers a backtesting parameter called 'EntryDays' that allows multiple trades to be on at the same time. By selecting 'EntryDays' and setting the number of days you wish new trades to be entered, you can avoid path dependency in your backtests.

The technique offered by the ORATS backtester parameter called 'EntryDays' allows multiple trades to be on at the same time. Staggering trades helps to smooth results especially in options strategies with long days to expiration.

For example, if you are testing a long dated put and the stock steadily drifts up before crashing down will have much different results depending when the put trade was entered. This is called a backtest suffering from 'path dependency'.

Select 'EntryDays' and set the number of days you wish new trades to be entered. We use 30 days often but also have used down to 1 day between trades.

Still curious about how to put this trading strategy into practice? Watch the video for a demonstration of this technique:

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