Options backtesting is the application of backtesting to strategies that trade options: a set of rules is run against historical option prices to estimate how it would have performed. The task is harder than for shares. One underlying has hundreds of listed contracts across strikes and expiry dates, each with its own price history, so the data are large, costly and often incomplete. Every contract also ceases to exist at option expiry, so a test must keep choosing and rolling into new contracts.
Realistic pricing is the main difficulty. An option's bid-ask spread is wide, and a test that assumes trades at the midpoint can turn a losing strategy into a winning one. Tests must also handle early exercise, dividends and margin. Strategies that sell options for premium show steady gains for years and then a large loss, so a history without a crash flatters them. These issues are central to systematic options trading, alongside the general risk of overfitting.