Understanding the Backtests Results

Understanding the Backtests Results

Understanding The Options Backtesting Empirical Results

Success Rate (or Win Rate): The percentage of trades that were profitable

Average P/L: The average Profit or Loss of all trades in a study

Realized P/L: The Realized P/L is the aggregate dollar amount of all your closed contracts.  Every time you exit a trade, there is a resulting amount that either adds as a profit or subtracts - if it is a loss-,  from the "Realized P/L"

Realized Return or P/L or Total P/L: Total Profit or Loss of all trades in a study.
Note: Contracts at the end of the test, that are nor closed, also have a value. This value is obtained from its current market price. You can set up on the advanced configuration gear, how you want these open contracts to be treated.

P/L day: Profit per day. Total profit divided by total days in trade. This is a fundamental metric as it measures the efficiency of a strategy.

Trades (Occurrences): Total number of positions that were opened. (a multi-leg positions consisting of several contracts will count as one trade).

Req Capital: Required Capital is the Maximum Effective Margin.

Effective Margin: Is the running total of the Margin of each trade plus your P/L. You can see how it changes in the "Daily Summary" report. (follow the  View Daily Summary link at the bottom of the results page).

Margin: Is calculated according to CBOE practices - see the article on Margin Calculation .

ROC: Return on Capital. Is the "Total Return" of the strategy divided by the "Required Capital".

STD: Standard deviation of the results (realized P/L). Calculated as the square root of the sum of squares of (Realized P&L -Average P&L). We use STD as a proxy for risk. When comparing two strategies, the largest the STD the greater the volatility of the trade.

Loss Ratio: Sum of Total Realized P&L / Total Losses. If you have a P/L of $2.00 on ten trades, you may get there by winning 0.20 ten times (that is good) or by earning $40 and losing $38 (not so good). That is what that ratio is trying to tell us.

Maximum Drawdown: We calculate the Max Drawdown statistic as follows. Our algorithm looks at the portfolio balance of the strategy in question and finds the largest percentage amount that the balance ever declines from a local "peak" to a subsequent point in time (thus this is formally called "Maximum Peak to Valley Drawdown.")

Results on the Mini-Card

DTE: Days to Expiration

Max Count: Maximum Active Count, Maximum number of open positions. See Guide

Range: Date Range

Early Exit Conditions

MP:  @ % of maximum profits. Will be blank if not enabled.

Stop Loss: % of loss to exit. Will be blank if not enabled.

Tested: Icon when enabled.