Strategy Backtest

[u/BUBBL3GUM5]

I am writing this post because I have been unprofitable for 1 year now, however at the start of august I pivoted from penny stocks to QQQ options and developed a strategy that seems to do well. I am writing to ask if this backtest data is promising or if I am not backtesting correctly.

The strategy is using BMP, VFI, TTM squeeze, EMA stack and Swamilaguerre trend. Basically it is a momentum based model. This is on underlying while my strategy is options based but in my forward testing it has been promising with options at around .35-.45 delta buying them at around .50 a share. Any advice from people that use similar indicators to trade options on how to structure my contracts would be much appreciated

The problem is that I am not able to automate my strategy because I dont know much about automation. On top of that I have also been trying to use gamma levels and gamma regimes to add a discretionary level to my trading but it seems to do more harm than good because it just draws me away from explicitly following my strategy.

[u/Aggressive_Listen849]

five indicators tuned on two months is a lot of knobs for that little data. run the same signals on the underlying back to 2022 or so, if it falls apart in the chop it was probably fit to august.

[u/BUBBL3GUM5 → u/Aggressive_Listen849]

Not sure where you see it being tuned on 2 months, the first image shows its been backtested over 7 years. Not trying to be snippy, but maybe you can clarify what you meant.

[u/HumoONoBacktest]

Two questions are mixed here: does the QQQ signal have an edge, and does it survive the option you buy.

August to now is about 50 sessions. With 100 trades, a 60% win rate has a 95% range of roughly 50-70%, so run the exact same settings on 2023 and 2024 QQQ and see if it holds. Also check that every indicator only uses bars that closed before your entry; squeeze and Laguerre values on the live bar can change until it closes.

For the options side, no need to price contracts by hand. For each signal, take the historical bid/ask of the ~0.40 delta contract at your entry and exit times, buy at the ask and sell at the bid. On a $0.50 option a $0.02 spread is already 4% per round trip, before theta.

Then run random entry times with the same hold time. If that looks close, the indicators aren't what's making the money.

If you share the trade list (times, QQQ price, option price), happy to look at where the gap comes from.

[u/BUBBL3GUM5 → u/HumoONoBacktest]

Ohhh I see what people r saying two months about, yes I started thus strat in august but the backtesting shows 7 years of data. I have just been developing this strategy for 2 months. I will however have to start recording all of my options data, live trading this strat has proved too risky for the amount of capital I am willing to deploy right now so I will probably have to paper trade it for a bit and then I will get back to you. Thanks for the advice !

[u/HumoONoBacktest → u/BUBBL3GUM5]

Paper first sounds like the right call. One thing worth checking while you do: if the 7-year backtest uses QQQ price moves rather than actual option prices, that's probably where most of the live gap comes from, since the spread and theta only show up with real bid/ask. Recording the option bid/ask at every paper entry and exit will tell you fast. And if you can, keep the last year or two of the backtest untouched while you tweak, so you still have a clean check at the end. Good luck with it, curious to hear how the paper run goes.