This tool is designed for backtesting covered calls on the S&P 500 (SPX). It allows you to simulate how different option selling strategies would have performed historically.
The most useful feature is the Roll Trigger Delta input. This is intended to test the "roll forever" retail style of managing short calls that have gone In-The-Money (ITM). Think of this as a rough illustration of how realistic it is to expect to be able to roll an ITM short call forever until it expires worthless.
We intentionally isolate just the short call P&L to highlight whether or not selling a covered call provides excess returns over just holding the S&P 500.
Historical options data is expensive to acquire, and depending on the data source, there can be legal restrictions on republishing actual prices publicly. By approximating the prices ourselves (including estimated interest rates and dividends), we can include estimated option prices in the trade history report for complete transparency, allowing you to see exactly how we arrived at the P&L results.
Reminder: This is an educational tool only. These prices are estimates and should not be used for actual trading decisions.
It is true that you cannot perfectly calculate option prices using just the VIX because actual market prices reflect varying implied volatility (IV) across different strikes (skew) and different expirations (term structure), as well as fluctuating interest rates and dividend yields.
While our model assumes the same volatility across different expirations, we do attempt to adjust the volatility skew vertically across strikes. This brings our estimated prices closer to how actual SPX skew behaves, providing a more realistic (though still approximated) simulation than a flat VIX-based calculation would.
When using extreme parameters (very high or very low deltas) or when attempting to "roll forever," there may be instances where a strike for the exact target delta or a roll for a credit is mathematically unavailable or doesn't exist in a standard chain. In these cases, the simulation will use the next closest available strike. This can lead to inaccuracies compared to what you might expect but reflects the practical reality of limited strike availability.
Example: If you sold a deep In-The-Money (ITM) call several years ago and have been attempting to "roll it forever" for 20 years, you may find that as the index moves significantly higher, the extremely low strikes you originally traded are no longer listed in the available option chains. The simulator will then select the lowest available strike to continue the backtest, which might differ from your expectations.
The simulation follows specific logic for different trade phases:
A new trade is opened in these scenarios:
New trades use the Target DTE to pick an expiration and the Short Call Delta to select the strike.
If none of the management triggers are hit, the trade is held until expiration. Upon expiration, the P&L is realized and a new trade is opened for the next period.
Have questions, feedback, or found a bug? Send us a message.