How to Backtest Custom Multi-Leg Options Strategies

The ORATS backtester is designed to allow the combination of multiple strategies. With this feature, custom multi-leg options strategies can be made.

Here's how to combine multiple strategies. First, run two or more backtests. Click the box next to the backtests to combine. Select the blue 'Combine' button.

Enter the weightings of the strategies. In this case we entered 100 for both strategies. For example, below the covered call strategy, buying a stock and selling a call, is combined with a long put. The result is a collar strategy. The combine method gives more flexibility to the collar strategy, for example the put can be longer dated than the short call.

The resulting returns and Sharpe usually comes out as an average of the two.

Weightings can be varied. Many more strategies can be combined.

Give it a try! Experiment.

Check out the video here. At 5 minutes and 12 seconds in, the combining method is shown. Also, in the video there is backtesting with IV rank, Earnings (2:30 minutes in), Custom Dates (3:45), Combine (5:12)

Here's a post on backtesting short-term SPX options.