Link: https://app.optionsautotrader.com/create-auto-trader?strategy=ThetaFairy%20Bot
In this guide, you'll learn how to use the Theta Fairy option bot, which is designed to take advantage of Theta decay from overnight trades. The guide walks you through setting up the bot, reviewing backtest results, and managing trades effectively, including key details like trade entry and exit times, strike prices, and capital requirements.
You'll also get tips on paper trading before going live and how to scale up your strategy. This is a step-by-step process to help you automate and optimize your overnight trading strategy.
Step 1: Understand the Basics of the Theta Fairy Bot
The Theta Fairy bot is designed to collect Theta decay from overnight trades. It enters the market late in the evening and closes the position the following morning.
The strategy is particularly effective on Thursdays before market close or a little after, and it can be applied to futures options or SPX/SPY options.
Step 2: Review the Backtest Results
The backtest shows an average win of $300 and an average loss of $500 with a win rate of 73%.
The time in trade is one day, as you enter the trade in the evening and close it the next morning.
Keep in mind that past performance does not guarantee future results, so it's recommended to paper trade first.
Step 3: Set Up the Trade
For Futures Options (MES):
Enter the trade before or right after market close (around 3:55 PM).
This is a 1 DTE (Day to Expiration) strangle with a 16 Delta for each strike distance.
You can also consider entering the trade an hour after the market closes (around 4:55 PM).
For SPX or SPY:
Similar setup, but note the higher capital requirement (up to $8,000 for SPX).
Step 4: Manage the Trade
No stop-loss or take-profit levels are set for this strategy.
The bot automatically closes the trade the following morning around 10 AM to capture the full Theta decay.
Step 5: Paper Trade Before Going Live
Start by paper trading the strategy to get familiar with how it works.
You can view backtest results and rules for this bot by clicking on "Start Using Bot" and checking the detailed rules under the "Fast Income Bots" section of the strategy database.
Step 6: Monitor and Adjust as Needed
The bot is automated, but it's important to monitor the trade in the early morning to ensure the Theta decay is captured effectively before closing the position.
Step 7: Start Small and Scale Up
The required capital will vary based on the asset you trade, ranging from $800 for MES to $8,000 for SPX. Start with a smaller amount and scale up as you become more comfortable with the strategy.
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.