This could make determining a hypothetical profit or loss on a past trade more difficult. To complicate matters more, options trades may be made up of various legs that together make up a specific strategy. So, using the stock chart could end up being insufficient. However, the price that displays on a stock chart doesn’t tell you how an option is performing. Option traders sometimes refer to the chart of an underlying stock for entry and exit signals. But for options trades, the process can be more difficult. Backtesting Options with Benefitsįor stocks, backtesting is relatively straightforward. It may not guarantee future results, but this type of backtesting can help you evaluate the efficacy of certain trading rules or strategies. Taking this approach seriously could help in deciding specific entry and exit points and determining an outcome for past simulated trades. Yet, looking back in time and running “what-if” scenarios can be a valuable part of a trader’s practice. When it comes to the stock market, history may not repeat itself. Know the different ways to view P&L for simulated trades.Learn how to use the thinkBack tool in thinkorswim® to backtest options strategiesĭetermine various profit and loss (P&L) scenarios and see simulated trades play out
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