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Gaining an Edge with Covered Call Backtesting

Written by admin
Wed Jan 18 2023
Gaining an Edge with Covered Call Backtesting - MarketXLS
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Gaining an Edge with Covered Call Backtesting - MarketXLS

Gaining an Edge with Covered Call Backtesting

The stock market can be a difficult place to make significant profits, especially when trading alone. But with the right knowledge, investors can tip the scales in their favor. Those looking to increase their odds should consider a strategy often used by some of the most successful traders: covered call backtesting.

What is a Covered Call Backtesting?

A covered call is an options trading strategy which involves two transactions. First, an investor buys a stock and simultaneously sells a call option on it. This means they make money if the stock remains largely unchanged and they can also make money if the stock rises by a certain amount. Covered calls are used to either generate extra income from a portfolio or limit losses due to a decrease in the stock price.

Backtesting is an important part of this strategy. It allows investors to identify patterns in past performance and adjust the strategy accordingly in order to maximize their profits. Factors such as options expiration, stocks volume and volatility should be taken into account when backtesting.

Benefits of Covered Call Backtesting

The primary benefit of covered call backtesting is the ability to determine whether a strategy is likely to be successful. Backtesting can provide traders with valuable insights into which stocks are most profitable to sell calls on, how much to pay for the stocks, how to select strike prices, and when to buy and sell. This helps investors make decisions based on data rather than guesswork.

Backtesting also allows investors to test strategies over a much longer period of time than is available with paper trading. Doing so helps identify any weaknesses or changes that may be needed in the strategy and can also highlight any inefficiencies.

MarketXLS and Covered Call Backtesting

Using backtesting to gain an edge when trading covered calls can be a tricky process that requires knowledge and skill. Fortunately, there is a tool that can greatly simplify the backtesting process and maximize results: MarketXLS.

MarketXLS can help investors gain an edge through its advanced options and analysis tools. These tools make it easy to identify profitable stocks, predict future prices and indicators, and conduct backtesting. MarketXLS also offers a comprehensive portfolio tracking feature, so investors can easily monitor their profits and losses.

Using MarketXLS can help investors maximize their profits when trading covered calls. With its advanced tools and features, investors can confidently analyze the markets and backtest their strategies for greater trading success.

Here are some templates that you can use to create your own models

Search for all Templates here: https://marketxls.com/templates/

Relevant blogs that you can read to learn more about the topic

“How Iron Condor and Strangle Options Differ”

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Ankur Mohan MarketXLS
I am so happy you are here. My name is Ankur and I am the founder/CEO of MarketXLS. Over the past four years, I have helped more than 2500 customers to implement their own investment research strategies and monitoring systems in Excel.
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