Getting Started with Options Backtesting on PHI 1

Before you use a trading strategy, be it an options trading strategy or otherwise, to work, it is important to test it. The fundamental ways to evaluate options trading strategies include backtesting and forward testing.

Backtesting trading strategies refers to testing your strategy using historical data sets.

Forward testing refers to evaluating your trading strategy using simulated environments.

As a trader, testing your options trading strategy is of utmost importance, as it will not only help you avoid huge losses but also help you trade stress-free.

With backtesting, you can understand how viable your trading strategy is without the need to risk your money. Yes! It’s basically testing how good your trading strategy is when tested with real market data.

You can test both – simple and complex options trading strategies requiring multiple parameters and inputs with backtesting using options backtesting software on an algorithmic trading platform.

The analysis that you get from backtesting can help you optimize your trading strategy.

Here’s how you can perform these backtest options strategy with ease on PHI 1:

Step 1: Open the Option Leg Builder on PHI 1.

Step 2: Select the index or stock, expiry, and the strike price whose options you want to trade to create your desired strategy.

Step 3: You can save this strategy for future use as a template by clicking ‘save strategy.’ Read how you can create the straddle strategy with PHI 1 here.

Step 4: This strategy is saved.

Step 5: Select Create Options Backtest.

Step 6: Select strategy to backtest, select symbol or stock on which you want to backtest the strategy, select test parameters like expiry date, period, etc. and run the backtest.

Step 7: Voila! You can see the result on the next screen within a minute or two!

Step 8: You can check monthly trades, equity charts, and logs for your strategy

Kudos! You have successfully backtested the strategy created by you.

You can backtest any other options trading strategy in the same way.

Watch our webinar on “How to backtest your options trading strategy using PHI 1.”

In this webinar, you will learn to create popular options strategies like an iron corridor, straddle and strangle and deploy it too!

And hey! Before you watch the video, one more thing.

There’s a lot of automated trading tools available in the market which offer the backtesting option.

But, what if you could see payoff charts, Greeks, and more along with robust screening and deployment on a single automated trading platform?

That’s PHI 1 for you!

Avail of the free trial to experience trading automation in full throttle.

Try for free today!

Getting Started with Options Trading on PHI 1

Options trading can be tricky, especially if you don’t use the right trading platform. Algo trading software can make it simpler and quicker to trade options.

Here’s a guide on how you can start options trading with ease using PHI 1.


Access comprehensive charts:

Using PHI 1 for options trading will give you uninhibited access to detailed charts and data sets. You have the choice of displaying any chart, symbol, price-related data across various time frequencies. This means minute-to-minute trading actions and movement will be available at your fingertips.

For displaying charts, you need to click on the graph symbol on the left side of PHI 1. All NSE instruments are available here. You can choose any scrip you want.
Choose Script for Option Trading
For Options, you would need to click the F&O selector in the header and choose your desired scrip, expiry, strike price, and whether it is a call or a put option. Once that is done, click generate.
F&O selector in the header
With PHI 1, you can get access to data across various time periods. Whether it is daily swings or market ticks by the second, you can generate data for any time you want.
time periods for daily swings or market ticks
There is no restriction on the number of indicators you can apply here. You can use multiple indicators at a time.

Another useful feature that needs to be highlighted is the ease of transactions.

If you have connected your broker to your account, you can place a buy or sell order directly from PHI 1’s interface.
multiple indicators
There are two ways to select the option instrument on PHI 1:

A. One is by directly inputting the precise strike and expiration date, or

B. You can choose from the dynamic monthly and weekly options available. You can choose any strike price like at the money (ATM), and the software generates various options that get updated daily.

option instrument on PHI 1
In case you want to come back to the charts in the future, you can do so by saving the chart. Just click on ‘Save’ in the header with the name you want.

Your chart template is now saved and you can continue your technical analysis whenever you want.
chart template for technical analysis

Built-in strategy templates

For viewing the various strategy templates available at hand, click on the menu options on the right-hand side, and select strategy.

Under the strategy, you have two options to choose from. You can either start with the form mode or code mode.

With form mode, you have basic strategy templates available with various indicators so you can algorithmic trading without coding.
Built-in strategy templates
You just need to select the strategy template that you require (SMA, EMA, etc). You get a basic buy and sell condition on which you can add a stop loss and take profit.

If you have your own entry and exit rules, you can enter them using either the form mode or code mode. Also, if you need any coding help, just contact PHI 1 support and they will help you out.

Once your strategy is ready, all you need to do now is click on ‘Run and Save’.
SMA and EMA strategy template
When the run completes at the day frequency, you get the default run for the entire year.

There are other trading performance metrics that you get access to at this stage such as your overall returns, long-short trades, profitable trades, loss-making ones, each entry, each exit, and overall return.

It’s super easy to get started with the form mode. You can add as many indicators as you want to experiment with in order to get the results you require.
Set day frequency
Even with code mode, you have access to 10 templates, to begin with.
Inbuild templates
Let us understand code mode with an example.

When we choose the first strategy template – Bollinger, it gives you an initial indication for you to calculate and take buy and sell orders based on where your current price is in terms of the Bollinger band with default parameters.

You can change the parameters and buy/ sell orders based on the metrics you want to analyze.
understand code mode
If your current strategy isn’t working, and you want to include an additional trading indicator of your own, you can introduce the code under initialize code here.

In the screengrab below, the code for MACD is added in the box.
code for MACD
Next, you will need to add the set of conditions under step code.

The first condition is that, from the top, MACD should be < zero.
set conditions
And on the opposite side, before the uptrend, we want the MACD to be >zero.
opposite side uptrend
This added indicator helps filter out unfavorable trades and allows you to focus on trades that may work in your direction.
filter out unfavourable trades
The code mode is not limited to only the 10 indicators visible in the drop box.

You can access nearly 119 indicators available in the learn section on the left-hand side to add to your strategy.

You also have the option of using multiple indicators at one go, to analyze market trends, and review the metrics you need.

You can experiment with trading strategies, time frequencies, add stop-loss conditions, and different instruments.
visible indicators
When building a trading strategy for options, the process is exactly the same.

You just need to choose your desired option and strike price and run the strategy.

You can choose different time frames from hourly to monthly, visually inspect all trades to see how the premiums have changed over time, etc.
trading strategy for options
With PHI 1, options trading gets bigger and better.

You can not only try out tested and experimental strategies but also see payoffs, backtest, and simulate trades.

Finally, you can deploy your trades with the broker of your choice using the multi-broker integration.

In a nutshell, PHI 1 offers total freedom for the trader to exploit market opportunities while trading options by managing mundane tasks that take away time and effort.

Try PHI 1 for free!


Watch our webinar on ‘Getting Started Options Trading with PHI 1’ here.

Stay tuned for more.

Creating a Straddle Strategy with PHI 1

What is the Straddle strategy in options?

Straddle strategy is an options trading strategy in which the trader buys both a call option as well as a put option of the same underlying asset or stock having the same expiry date and strike price.

Usually, traders use the straddle strategy when they are sure of a significant movement of the underlying stock’s price, but are unsure of the direction, i.e. whether the price will rise or fall significantly.

Thus, in this strategy, the trader will make a profit when the price or the underlying stock rises or falls by an amount that is more than the premium paid to buy call and put options.

The profit potential is unlimited as long as the price of the underlying stock moves significantly in either direction.

For example, consider a stock whose price is Rs. 10.

The trader is expecting a significant movement in the stock’s price within 15 days post its result on 1st February.

But, he/she is not sure if the market will take the result positively or negatively.

So, the trader goes for a straddle strategy, i.e., he/she buys call options and put options with expiry of 15th February and bets the price to rise above Rs. 12 or fall below Rs. 8.

Thus, in this way he/she will make a profit on any movement of the stock price beyond Rs. 2.

Looking at a straddle, a trader can know two things about the sentiment of the options market towards a particular stock. The first is that the market is expecting volatility in the price of the stock, and the second is the expected trading range of the stock’s price.

You can easily try this strategy on PHI 1 as shown below:

Step 1:
Open the Option Leg Builder on PHI 1.

Step 2:
Select the index or stock whose options you want to trade.

Step 3:
Select the expiry.

Step 4:
Select the option strike price.

Step 5:
Select PE (put option) in option type.

Step 6:
Add this position by clicking Add Position.

Step 7:
Keeping all other parameters the same, select CE (call option) in option type.

Step 8
Add this position by clicking ADD POSITION.

Voila! You have created the straddle strategy with the payoff chart.

You can save this strategy for the future as a template by clicking ‘Save strategy’.

Now, prior to deployment you may want to perform backtesting for your options strategies. You can avail free options backtesting with PHI 1.

You can also deploy your options strategy easily when your predefined criteria are met. This means no more staying glued to the screens for the right trading opportunity to come!

Make the most of automation with PHI 1!

Try for free today!


Watch our demo of how to test straddle strategy using PHI 1’s Options Trading feature: Watch Now!