Every week, Helium runs backtests to find profitable (risk adjusted) options strategies for particular stocks and ETF’s. A backtest is a trading simulation based on past pricing data.
Helium is in no way responsible for the accuracy of any of our strategies, models, or forecasts. Helium is for informational purposes only.
To view Helium’s top options trades, click the Blue Forecasts button, then choose Top Options. To view the backtests, click the red “Options Backtesting” buttons.
How It Works
Using an advanced genetic algorithm, Helium determines a robust options trading strategy that would have resulted in a high Sharpe ratio. In addition to selecting the options, Helium also considers early profit taking, cutting losing trades early, and implied volatility thresholds when opening trades.
Helium subscribers can see P/L over time, Sharpe ratio, percent winning trades, as well as a graph showing risk exposure to movement in the underlying (delta risk).
The x-axis is time. The y-axis is P/L in $.
In addition to simple trade implementation details, Helium displays a risk exposure graph (shown below) which displays the profitability of the position as a function of the underlying price at option expiration.
Green shows strategy profit while red shows strategy loss
The x-axis is % price change over trade durations. The y-axis is potential P/L.
To backtest a given strategy, Helium opens a new position every trading day (unless a volatility or liquidity threshold is unmet). For time spreads, Helium closes the position before the first expiration date. Positions can be closed at the end of each day.
Since traders have different risk tolerances, there are Some, More, High, & Crazy risk levels, which reflect the maximum possible losses for each strategy.
Since this is backtested and not real trading, the results are subject to backtest bias a.k.a hindsight bias. This means that, retrospectively, this would have been a profitable strategy if repeated daily, but we had no way of knowing this before hand! Because of this uncertainty, it’s unknown whether the strategy will continue to have the same returns. It’s best to interpret backtests as descriptive (this is what would have worked) instead of prescriptive (this will work).
To make our backtests more grounded and to better reflect liquidity risks, all Helium backtests buy at the ask price and sell at the bid price at the end of eachc trading day.