OmniTrader Upgrade Forums
OptionTrader
Options in ATM
13 replies, 1945 viewings
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OmniTrader Upgrade Forums
OptionTrader
Options in ATM
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Last Activity 12/1/2022 8:14 AM 13 replies, 1945 viewings |
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John J Veteran   Posts: 272 Joined: 8/3/2010 Location: Leduc, AB  User Profile |
Given the current implementation, an option tradeplan needs to be part of a strategy obviously. However, a signal produced by a strategy is nothing but a binary switch (the signal is either 100% bullish/bearish or nothing at all). With options on the other hand, the option spread you pick depends on HOW bullish/bearish/neutral you happen to be. So in reality, it stands to reason that it really only makes sense to trade long Calls/Puts from signals. For instance, it doesn't make any sense at all to have signals trigger delta neutral option tradeplans, only whenever certain conditions occurs. This is exactly the functionality ATM brings to the table. In ATM, we should therefore be able to bypass the strategy altogether, and let Market State/Trade Filtering/Trade Ranking/Allocation determine which option tradeplan to use. This will require an 'Option TradePlan' tab to be added to the ATM Toolbox for obvious reasons. | ||
| Barry Cohen Sage   Posts: 6338 Joined: 1/19/2004 User Profile |
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| Barry Cohen Sage Posts: 6338 Joined: 1/19/2004 User Profile |
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| John J Veteran Posts: 272 Joined: 8/3/2010 Location: Leduc, AB User Profile |
Originally written by 291234 on 2/23/2018 9:34 AM The way ATM is set up, you can have a different set of option trade plan strategies for each market state. Hi Barry, that's true but signals become useless for most delta neutral option strategies (i.e. strangles and straddles); 1. For long straddles/strangles you couldn't care less about market direction, as long as the price moves away from the current price. 2. For short straddles/strangles you want the price to move very little or nothing at all. The only way to get around this is to separate such option tradeplans from signal producing strategies, and instead link them to certain user specified conditions. Jim, My suggestion has got nothing to do with the 'Protection Put', but for option trades in general. [Edited by John J on 2/23/2018 11:04 AM] | ||
| Ed Downs Member Posts: 11 Joined: 2/12/2013 User Profile |
Most option players, and especially those trained by outfits like Think or Swim, look at the option market as an opportunity to sell premium. It doesn't matter what the stock is doing, only what the options in the spread are doing. And, if you pick the right spreads, you can definitely capture premium from the market as long as the stock stays in a certain range, and if you continually adjust the position. It's a good bet and people make money doing it. The advantage we have with OmniTrader is we can apply directional options strategies to Signals. Some Signals, like "breakouts" do well with naked puts because price will usually stay at or near the breakout level. "RTMs" do well with Debit or Credit Spreads because the implied volatility is significantly neutralized (since you are buying one option and selling the other in the same instrument), which means you won't pay a high premium to enter the trade. I am personally working in options right now, and plan to provide examples of replacing trade plans in our existing Strategies with option versions. John is 100% correct about Delta Neutral. Thanks for the clarification. Our non-directional trade plans are designed to capture premium based on assumptions about where the stock is going to go (or not go). But they aren't designed to continually adjust positions the way people do with Delta Neutral trading. You actually can generate Signals in OmniTrader that are "neutral". The important factor in such a Strategy is using Filters to make sure the stock is either likely to move or not likely to move (straddle vs strangle). The Signal in this case would only be intended to fire the trade, without regard to direction. | ||
| Mel Veteran Posts: 291 Joined: 12/30/2003 Location: Kensington User Profile |
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| John J Veteran Posts: 272 Joined: 8/3/2010 Location: Leduc, AB User Profile |
Yes, we have several delta neutral tradeplans available in our arsenal. The question is how do we trigger such tradeplans in strategies? Ed mentioned above that "The important factor in such a Strategy is using Filters to make sure the stock is either likely to move or not likely to move (straddle vs strangle). The Signal in this case would only be intended to fire the trade, without regard to direction." A filter in OT (and ATM) is still limited to long or short conditions, though. Perhaps we need to add a neutral condition under the filter tab as well? [Edited by John J on 2/23/2018 1:03 PM]  Attached file : Capture.JPG (97KB - 934 downloads) | ||
| Mel Veteran Posts: 291 Joined: 12/30/2003 Location: Kensington User Profile |
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| John J Veteran Posts: 272 Joined: 8/3/2010 Location: Leduc, AB User Profile |
You seem to be referring to manual trade management? That's not what I'm getting at. In ATM we need to be able to AUTOMATE the trade selection process, including the various trades that can be made with option spreads. However, OT is limited to long or short signals only, and neither one is applicable to straddles and strangles obviously. In order to circumvent this problem, Ed is suggesting the use of filters to produce 'neutral' signals (True/False as opposed to Long/Short). I hope N will further elaborate on this, though... [Edited by John J on 2/24/2018 6:11 AM] | ||
| Mel Veteran Posts: 291 Joined: 12/30/2003 Location: Kensington User Profile |
Mel | ||
| Jim Dean Sage  Posts: 3022 Joined: 9/21/2006 Location: L'ville, GA User Profile |
This is just a WAG light bulb idea. But it might work handily. Of course you'd need to write your own System ... none of the canned ones would do. | ||
| John J Veteran Posts: 272 Joined: 8/3/2010 Location: Leduc, AB User Profile |
As all of us know, a strategy can contain only ONE tradeplan block. This is obviously fine for stocks and directional option spreads. For non-directional option spreads though, the market state and expected volatility of the underlying stock price should obviously govern which tradeplan to use. However, there's currently no way of AUTOMATING the search process across various types of option spreads in OT (i.e. the type of option spread used in the tradeplan has to be pre-selected and therefore hardwired). Even the creation of several option strategies, all with different tradeplans won't solve this problem. What N choose to do with this, I dunno. At least the seed has been planted... :D [Edited by John J on 2/25/2018 7:07 AM] | ||
| Jim Dean Sage Posts: 3022 Joined: 9/21/2006 Location: L'ville, GA User Profile |
[Edited by Jim Dean on 2/25/2018 2:21 PM] | ||
| Mel Veteran Posts: 291 Joined: 12/30/2003 Location: Kensington User Profile |
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