BlueprintUpdated
Running a simulation
Every Monte Carlo setting explained: Simulations, Horizon, Initial capital, the Stress (×/yr) injector and its two worst-case modes.
Open the Monte Carlo tab of the Portfolio workspace, set four numbers, optionally arm the stress injector, and hit Run simulation. The run is explicit (not automatic) because it's a heavy computation over thousands of paths.
The settings
| Setting | Range (default) | What it does |
|---|---|---|
| Simulations | 100 – 10,000 (1,000) | How many alternative equity paths are generated. More paths = smoother percentile estimates, slower run. 1,000 is plenty for a first read. |
| Horizon (months) | 1 – 120 (36) | How far forward each path runs. Each simulated month draws ~21 trading days from your portfolio's daily-P/L pool. |
| Initial capital ($) | ≥ 1,000 | The starting equity each path accumulates on. Defaults to your portfolio's account size; editable if you want to model a different base. |
| Stress (×/yr) | 0 – 12 (0 = off) | Injects a worst-case event this many times per year, distributed across the horizon. |
The stress injector's two modes
When Stress is above zero, you choose what "worst-case event" means:
- Historical worst day — re-injects your portfolio's actual worst day from the backtest window. Grounded and conservative-ish: it happened once, the simulation makes it happen on schedule.
- Theoretical Black Swan — injects a simultaneous defined-risk max loss across the selected spreads: every crash-exposed position loses its full (width − credit) × 100 × contracts at once. This is the "everything hits the stop on the same open" scenario — deliberately harsher than anything in the historical window.
In Black Swan mode, a Strategies at risk in the crash picker appears. Deselect strategies that would profit from a crash (for example bear-call spreads) so the injected loss reflects your actual crash exposure rather than naively summing every position.
Two more switches
- Show individual paths — overlays a sample of faint individual equity paths on the band chart. Worth keeping on: the band looks orderly, the individual paths remind you what living inside one feels like.
- The results include a stress transparency dropdown ("What was sampled") listing the per-strategy black-swan max losses and your portfolio's ten worst historical days, flagging which one was injected — so a stressed run is never a black box.
Then read the output properly: Reading the results.