The Options Auto trader selects strike prices based on your defined rules. This guide explains the step-by-step process the system follows to ensure precise and non-overlapping trades.
Step 1: Avoiding Duplicate Trades
The system first checks your open positions to prevent placing duplicate trades.
This ensures trades do not overlap, even if the existing position was placed manually in your broker.
Step 2: Selecting Strike Price by Delta
The system looks for the specified delta value (e.g., 25 delta) in the broker’s options chain.
If an exact match is unavailable, it selects the nearest delta.
If the selected delta is already taken by an open contract, it picks the next closest available delta.
Example:
If 25 delta is unavailable but 24 and 26 delta exist, it selects the closest (e.g., 26 delta if 25 is taken).
Step 3: Selecting Strike Prices by Amount Out of the Money (OTM)
The system identifies the current stock price.
It calculates the distance away from the stock price based on your settings (e.g., $5 away).
If the exact calculated strike price is unavailable, it picks the nearest available one.
Example:
If the stock is at $604 and the rule specifies $5 OTM, the target price is $609.
If $609 is unavailable, it selects the nearest match.
Step 4: Selecting Strike Prices by Target Price
The system finds a strike price based on a specific option price.
It scans the options chain for contracts with a mid-price closest to the target.
The mid-price is the average of the bid and ask prices.
Example:
If targeting $5.00, and available mid-prices are $5.31, $5.11, and $4.94, it selects $4.94 as the closest match.
The Options Auto trader is a powerful tool for streamlining options trading. By understanding how it selects strike prices and implementing best practices, traders can maximize efficiency and minimize errors. Regularly reviewing settings and monitoring performance will help ensure the system aligns with your trading strategy.
Cautionary Notes
Market Fluctuations: Prices and deltas change frequently; verify settings before execution.
Liquidity Considerations: Low liquidity can impact order execution and spread width.
TERMS OF SERVICE: Please be aware that continued use of the Options Auto Trader is subject to our Terms Of Service. If you have any questions or wish to review these terms, feel free to visit the website.