Options Backtesting in Python: An Introductory Walkthrough

Non-members can read this story via my friendly link

Trading strategies refer to systematic approaches for buying and selling securities, aimed at generating profits. However, the inherent challenge lies in the fact that, being strategies, they are not foolproof and may not always yield success. This is particularly evident in the case of potentially volatile securities such as options, where an ill-suited strategy can result in significant financial losses at a rapid pace.

The name itself highlights the strategic nature of these approaches, and their outcomes are not guaranteed. While there is no foolproof way to ensure the success of a strategy, a prudent step before implementation is backtesting. Although it’s commonly stated that past performance doesn’t guarantee future returns, historical data serves as a valuable reference point.

This article will guide you on initiating options backtesting in Python. It will begin with a brief overview of options, explore the reasons why Python is a suitable choice, and then delve into using one of the most effective libraries for backtesting.

Before we begin, I extend an invitation for you to join my dividend investing community. By joining, you won’t miss any crucial articles and can enhance your skills as an investor. As a…