How To Manage Trades When Short Strikes Are Hit

In the Options Auto Trader, you can automate how your trades are managed when the short strikes of your options positions are hit or breached. This advanced feature allows you to mitigate risk and adjust your strategy automatically when critical price levels are reached. You can choose from several management options, including closing the entire trade, closing specific legs, or adjusting one side of the trade. Here’s how to set it up.

Step 1: Access Advanced Management Strategies

To enable Short Strike Management, you’ll need to adjust the Advanced Management Strategies for your auto trader.

1. Log into your Options Auto Trader account.
2. Go to the Auto Trader page and select the bot you want to configure.
3. Click the gear icon to edit the bot’s settings.
4. Scroll down to the Advanced Management Strategies section.

Step 2: Enable Short Strike Management

In the Advanced Management Strategies section, you can configure how the auto trader manages your trade when a short strike is breached.

Management Options:

1. Close the Entire Trade:
   • Automatically exit all legs of the trade if a short strike is hit.

   • Use Case: Ideal for traders who want to fully close out the trade to minimize further risk.

     Close the Short Legs Only:

   • Closes only the short options legs, leaving the remaining positions open.

   • Use Case: Useful for reducing risk while keeping potential hedges or protective positions intact.

     Close the Broken Side:

   • Exits only the side of the trade where the short strike has been breached.

   • Use Case: Suitable for trades like iron condors or strangles where one side of the trade is breached, but the other side may still be profitable.

     Close the Unbroken Side:

   • Exits the side of the trade that hasn’t been breached, leaving the breached side open.
   • Use Case: Used for advanced strategies where the trader may want to retain positions on the broken side for potential recovery or further management.

How to Configure:

1. Enable the Manage Trades When Short Strikes Are Hit option by checking the box or toggling the switch.
2. Select one of the four management options based on your strategy.
3. Save your settings to activate the feature.

Step 3: Monitor and Adjust Settings

Once enabled, the auto trader will automatically apply the selected management strategy when a short strike is hit. You can monitor the performance and execution of these rules in the Dashboard or Trade Transparency page.

Adjusting the Settings:

• If market conditions change or your strategy evolves, you can return to the Advanced Management Strategies section to modify your short strike management rules.

Example Scenarios

Example 1: Closing the Entire Trade

You sell an iron condor with short strikes at 100 (put) and 120 (call). If the underlying price breaches 100 or 120, the auto trader closes all legs of the trade, exiting the position entirely.

Example 2: Closing the Short Legs Only

You sell a straddle with short strikes at 110 for both the put and call. If the underlying price breaches 110, the auto trader closes the short legs but leaves other positions open for potential profit or hedging.

Example 3: Closing the Broken Side

You sell an iron condor with short strikes at 100 (put) and 120 (call). If the price breaches 120, the auto trader closes the call side only, leaving the put side open as it’s still profitable.

Example 4: Closing the Unbroken Side

You sell a strangle with short strikes at 90 (put) and 110 (call). If the price breaches 90, the auto trader closes the call side while leaving the put side open for further management.

Conclusion

Managing trades when short strikes are hit is an essential risk management tool for options traders. With Options Auto Trader, you can automate your response to breached short strikes, choosing from flexible strategies that suit your risk tolerance and trading goals. By configuring these settings under the Advanced Management Strategies, you can reduce stress and improve efficiency in your trading.

If you have any questions or need help setting up this feature, feel free to contact our support team.