When you backtest options strategies, you trust that the results are close to reality. But most backtesting tools work with simplified data – and that is exactly what makes their results unreliable, without it being obvious at first glance.
In this article we explain what data SPAIKE uses, why the difference between standard high/low and NBBO high/low matters, and how Second Drilldown ensures you know the exact second your exit was triggered.
What does "accurate data" actually mean in backtesting?
A backtest simulates what would have happened if you had traded a specific strategy in the past. For that, the system needs historical price data – the prices at which options were actually traded or could have been traded.
That sounds straightforward, but it is not. There are different ways prices are captured and stored. Depending on which data a tool uses, the backtest results for the same strategy can look completely different.
SPAIKE uses real historical market data from ThetaData – one of the leading sources for institutional options data in the US. This data goes back up to 9 years and covers expirations from 0DTE to 365DTE.
Not all high/low data is created equal
Many tools show "high" and "low" values for an options contract – the highest and lowest price within a time interval (for example, one minute). That sounds clear enough. But the critical question is: where do these values come from?
Standard high/low (Trade OHLC)
Most platforms use so-called Trade OHLC data. These are actual executed transactions – prices where a buyer and a seller actually matched.
The problem: for many options contracts, zero or very few trades happen within a single minute. The high/low values based on these trades can therefore be extremely sparse. Sometimes there is only one trade in an entire minute – then Open, High, Low and Close are all identical. The backtest looks "clean" but does not reflect what the market was actually offering.
NBBO high/low
SPAIKE additionally offers the option to use NBBO-based high/low values. NBBO stands for National Best Bid and Offer – at any given moment, this is the best available buy and sell price across all US options exchanges.
NBBO data is significantly more meaningful than pure trade data because it shows at what price you could actually have traded – even when no trade took place at that moment. The market made an offer, and that exact offer is captured.
In practice this means:
- No artificial gaps: Even in illiquid minutes an NBBO price exists because market makers continuously post quotes.
- More realistic extreme values: NBBO-based high/low values show the worst-case and best-case scenario the market actually offered during that interval.
- Better stop-loss and take-profit simulation: When your backtest checks whether a stop loss was triggered within a minute, NBBO provides a more reliable answer than a trade-based dataset with zero or one trade.
In SPAIKE, switching is a simple toggle: "Use NBBO Extreme" activates NBBO-based exit checking per leg group or per individual leg.
Second Drilldown: from minute-level to second-level exits
Even with the best high/low data, most backtesting tools have a fundamental limitation: they operate at minute resolution. The backtest can tell that a stop loss or take profit was triggered within a given minute – but not exactly when.
For many strategies this is not a big deal. But for 0DTE strategies or during periods of high volatility, options prices can move dramatically within a single minute. Whether an exit triggers at second 12 or second 47 can mean hundreds of dollars per contract.
How Second Drilldown works
SPAIKE solves this with the Second Drilldown (Minute → Second) feature. The process:
- Detection at minute level: The backtest first checks minute by minute whether an exit condition (stop loss, take profit, custom exit) was triggered within the interval.
- Drilldown into the exit minute: Once the relevant minute is identified, it is resolved at second level. SPAIKE analyzes the second-by-second data within that minute and determines the exact trigger moment.
- Precise exit price: The exit is executed at the price of the specific second – not at the minute close or some average value.
The result: a backtest that shows not just whether your exit triggered, but exactly when – and at what price.
Why does this matter?
A concrete example: you sell an SPX put credit spread with 0DTE. Your stop loss is set at 200% of the entry premium. At 2:32 PM volatility spikes sharply.
- Without Second Drilldown: The backtest detects that the stop loss was triggered somewhere during the 2:32 PM minute. The exit is priced at the mid price or the high/low of the minute. That can deviate by several hundred dollars from the actual trigger point.
- With Second Drilldown: SPAIKE detects that the stop loss triggered at 2:32:18 PM and uses the price at that exact moment. The result is reliable.
The data foundation: 9 years, 0–365 DTE, second-level resolution
All of the above features would be worthless without the right data foundation. SPAIKE works with historical options data from ThetaData with these characteristics:
- Time range: Up to 9 years of historical data
- Expirations: 0DTE to 365DTE – from daily expirations to annual options
- Resolution: Second-level data via ThetaData v3
- Data types: Trade OHLC and NBBO quotes, including Greeks
- No synthetic data: No interpolation, no artificially generated prices – exclusively real market data
This combination makes it possible to precisely test even complex multi-leg strategies over long time periods – including different market phases, volatility regimes and stress periods.
How to choose the right level of data accuracy
Not every backtest needs second-level resolution. That is why SPAIKE offers a tiered system:
- Standard: Exit checking based on MidPrice (average of bid and ask). Fast and sufficient for many strategies.
- Use High/Low: Enables OHLC-based exit checking. The backtest checks whether the extreme value of a minute would have triggered the stop loss or take profit.
- NBBO Extreme: Uses NBBO-based high/low values instead of Trade OHLC. More realistic extreme values, especially for illiquid contracts.
- Second Drilldown: Refines the exit from minute level to second level. Maximum precision, especially relevant for 0DTE and volatile periods.
You can configure these settings per leg group or even per individual leg – depending on how precisely you want to test a specific part of your strategy.
Data quality as the foundation for everything else
AI strategy builders, automatic optimization, mass backtests, social features – these are all powerful tools. But they only deliver their full value when the underlying data they operate on is solid.
A backtest with inaccurate data produces inaccurate results – and decisions based on inaccurate results cost real money in live trading. That is why data quality forms the foundation at SPAIKE: real market data, NBBO-based extreme values and second-level exit resolution. On this foundation, every other feature can deliver what it was built for – reliable results instead of beautiful illusions.
FAQ
Do I need Second Drilldown for every backtest?
No. For many strategies with longer expirations, minute-level resolution is sufficient. Second Drilldown is especially valuable for 0DTE strategies and scenarios where the exact timing of the exit makes the difference.
Does Second Drilldown slow down the backtest?
Yes, because additional second-level data is loaded and analyzed within the exit minute. That is why Second Drilldown is not available for mass backtests (batch backtests) – the additional computation time would be too high.
What exactly is the difference between NBBO and trade data?
Trade data shows prices at which actual transactions occurred. NBBO data shows the best buy and sell offer available at any given moment across all exchanges. NBBO is denser and more realistic because it also covers moments without trades.
Can I combine NBBO and Second Drilldown?
Yes. You enable "Use NBBO Extreme" and "Second Drilldown" in the leg settings. This gives you NBBO-based high/low values at the minute level and second-level data for the drilldown.