How to Use Historical Options Prices in Your Strategy

By Intrinio
April 10, 2023

Historical options prices can be a valuable resource for traders looking to develop a strategy. By analyzing past price movements, traders can identify patterns and trends that can help them make more informed trading decisions. In this article, we will explain how to use historical options prices and where to find the data.

Why Look at Historical Options Prices

Looking at historical options prices can provide valuable insights and information for traders and investors who trade options or use options as part of their investment strategies. Here are some reasons why:

  1. Understanding price movements: By analyzing past options prices, traders can gain a better understanding of how options prices move in response to changes in the underlying asset's price, volatility, and other factors.
  2. Identifying trends: Examining historical options prices can reveal trends and patterns that can help traders predict future price movements and make more informed trading decisions.
  3. Evaluating strategies: Backtesting trading strategies using historical options prices can help traders determine the effectiveness of their strategies and identify areas for improvement.
  4. Assessing risk: By studying past options prices, traders can gain insights into the potential risks associated with various options trading strategies and adjust their approach accordingly.
  5. Benchmarking performance: Comparing a trader's performance to historical options prices can help assess how well the trader is doing relative to the market and identify areas for improvement.

In summary, analyzing historical options prices is an essential part of options trading and investment strategy development, as it can help traders make more informed decisions, manage risk, and improve performance.

How to Use Historical Options Prices in Your Investing Strategy

Here are some steps to use historical options prices in your strategy:

  1. Gather Historical Options Data: Start by gathering historical options data for the specific options contract you're interested in trading. This data can typically be found through financial data providers or options trading platforms.
  2. Analyze Historical Options Prices: Once you have the data, you can analyze the historical options prices to identify patterns and trends. This can be done through technical analysis techniques such as charting or using statistical tools.
  3. Identify Key Support and Resistance Levels: Use the historical options prices to identify key support and resistance levels for the options contract you're interested in trading. These levels can serve as potential entry and exit points for your trades.
  4. Develop a Trading Strategy: Based on your analysis of the historical options prices and support and resistance levels, develop a trading strategy that takes into account your risk tolerance, trading goals, and overall market outlook.
  5. Backtest Your Strategy: Before implementing your strategy in the live market, backtest it using historical data to see how it performs under different market conditions.
  6. Monitor Your Strategy: Once you've implemented your strategy, monitor it closely and make adjustments as needed based on market conditions and changes in the options prices.

Where to Find Historical Options Prices Data

There are several sources where traders and investors can find historical options prices data, including:

  1. Option Exchanges: Many option exchanges provide historical options prices data for a fee. For example, the Chicago Board Options Exchange (CBOE) offers a historical options data service that provides daily options prices for all optionable stocks and indices listed on CBOE, as well as for select ETFs and futures. Accessing the data directly from the exchanges comes with its own challenges, so try to avoid this unless you are part of an extremely large organization with a substantial engineering team.
  2. Data Providers: There are several data providers that offer historical options prices data. These include financial data providers like Bloomberg, Refinitiv, and FactSet, which offer comprehensive options data sets that cover multiple exchanges and asset classes. These providers typically charge substantial fees for the historical options data - they are the most expensive providers on the market, so make sure to assess your options (pun intended).
  3. Trading Platforms: Some trading platforms offer historical options prices data as part of their service. For example, Interactive Brokers, TD Ameritrade, and E-Trade offer historical options prices data for their clients. The downside of accessing historical options prices data this way is that you can only look at it - most of these platforms don’t provide API access or let you consume the raw data.
  4. Third-Party Providers: There are also third-party providers that specialize in options data, such as Intrinio. Intrinio takes care of all of the complexities of directly sourcing the data, cleaning it, delivering it, and supporting it. We deliver it through an easy-to-use API, supported by great documentation and SDKs. You can also pair our historical options prices data with other data, like real-time options prices, stock prices, fundamental data and more. This is a good option for anyone building investment apps, algorithms, or software.

In summary, there are several sources of historical options prices data, and traders and investors can choose the one that best suits their needs and budget.

Overall, using historical options prices in your strategy can help you make more informed trading decisions and potentially increase your chances of success in the options market. However, it's important to remember that past performance is not necessarily indicative of future results, and that trading options involves risk and should be done with caution. 

Be sure to thoroughly research the options for data providers - choosing an expensive, inflexible, or low-support provider can make or break your strategy. If you are interested in taking a free trial of historical options prices data from Intrinio, contact our team or chat with us today. We’re excited to work with you!

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