Options Testing/Trading Software

Discussions about the testing and simulation of mechanical trading systems using historical data and other methods. Trading Blox Customers should post Trading Blox specific questions in the Customer Support forum.
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Sandwalk3r
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Options Testing/Trading Software

Post by Sandwalk3r » Mon Sep 13, 2010 3:41 pm

I have enjoyed using TradingBLOX to help me test, debunk, retest, and re-debunk several strategies. Ultimately, I hope to gravitate to trading options contracts, vs any underlying securities.

I have some interesting not-in-a-book ideas for how to structure strategies with both risk profiles and potentials for profits that I believe would do well in either a personal portfolio or a managed fund (someday?). However, my ability to test all that solely with the help of TradingBLOX requires a lot of pen and paper and estimation of historical options prices using Black Scholes formulaic prices, instead of actual historical data.

Do any of you have recommendations on software that would help provide useful backtesting?

Do any of you use any particular options trading software that could be linked up with an external brokerage account (I use Interactive Brokers TWS).

Thanks!

~Sandwalk3r

7432
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Post by 7432 » Tue Sep 14, 2010 10:16 am

currently IB has pretty good options software for trading and risk analysis purposes. their program does not include auto quote and most importantly does not let the user view 'requests for quotes,' RFQ's.

that is a huge problem since all you can see is the market maker's electronic bid/ask. you might be willing to sell a spread at 34 while some customer is bidding 36.

the CME has good links for some very impressive, and just as pricey, software-
http://www.cmegroup.com/globex/trading- ... s/afp.html

also under IB technology partners there are a few companies that offer software for options testing and trading.

pretty much any package you use will offer strategy testing, but I don't know of any offering backtesting.
if you do find someone that has backtesting software using historical prices be very careful. options don't often settle based on tradable prices but on a conversion/reversal and skew basis.
so you might test a strategy based on settlement that makes money all the time but in reality it would never be tradable.

kianti
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Post by kianti » Tue Sep 14, 2010 10:38 am

7432 wrote:that is a huge problem since all you can see is the market maker's electronic bid/ask. you might be willing to sell a spread at 34 while some customer is bidding 36
Are you sure about that??? :shock: :shock: :shock:

best regards, as ever

kianti
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Re: Options Testing/Trading Software

Post by kianti » Tue Sep 14, 2010 10:44 am

Sandwalk3r wrote:Do any of you have recommendations on software that would help provide useful backtesting?....
I have the feeling that the problem is not the backtesting software but the data. Are you familiar with the concept of volatility 'skew'?

Best regards, as ever

7432
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Post by 7432 » Tue Sep 14, 2010 4:50 pm

Are you sure about that??? :shock: :shock: :shock:

nope, not sure at all.
sorry I've been dealing with just energy lately.
AFAIK, almost all globex markets will be shown.
except-

on nymex it has something to do with globex orders staying on the book and not being disseminated to the public, only to members.
so if I, not being a member, posted an offer at 34 in a put spread it would not show up on trader Z's TWS screen if he is not a member.
in my silly example, if a non member customer is bidding 36 I will not see it. if I am willing to sell at 34 and post the offer globex crosses the order and we are both filled. I think the back office guys get 2 ticks.

you can try this by ticking some spread quote like the dec 80/75 put spread. your order will be there but you can't see it on the quote line.

ICE softs have a similar deal I was told.

for currencies and bonds my orders are posted and visible.

this is only my experience and info based on conversations with IB. I was told there is no documentation.

if you have more info I'd like to be straightened out on this. maybe I've been talking to the wrong people at IB or asking the wrong questions.

kianti
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Post by kianti » Tue Sep 14, 2010 5:12 pm

7432 wrote: I think the back office guys get 2 ticks....
:shock: :shock: :shock: Who's in charge of the back office? Jerome Kerviel ??? :lol: :lol: :lol:

I am not familiar with NYMEX rules, but I have a feeling that is not the way futures market are regulated.

Best regards, as ever

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