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ATM
ATM Trading Options
Last Activity 4/21/2021 9:48 AM
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Bob W

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Subject : ATM Trading Options
Posted : 2/26/2020 10:22 AM
Post #46790

I just started using ATM3 trading options. It is set to trade at the open. The first 2 days it took 32 calls at market. The spreads are great at the open as options all don't open at 9.30 so as example on one trade it bought 13 CVS Mar 13 64.50 Calls @ 4.80 when the price is actually 1.95. So I opened down 3700.00. What I need to know is how to have ATM put in mid point limit orders?
I can set the to as when to submit them but there still market and some have large spreads.
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jpb

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Subject : RE: ATM Trading Options
Posted : 2/26/2020 10:31 AM
Post #46791 - In reply to #46790

Bob,

If you go into the strategy and look at the Trade Plan block, you will find where the open order is defined.

Select the Initial Order and switch to the Orders tab. In the Leg A area, you can change the order type to Limit and then the limit Offset to Bid-Ask Spread.

I've attached a screen shot of one of my option trade plans -- it will be different than what you probably have but it should give you an idea of the settings. I'm currently testing this particular trade plan so wouldn't recommend that you use these settings without some thought and testing of your own.




One other thing you might try (assuming you have Auto Trade) is to set AT to run 30 to 45 minutes before market close and submit the market order. Jeff Drake & Ed mentioned on one of the webinars that bid/ask spread are more reasonable later in the day than at market open.


[Edited by jpb on 2/26/2020 10:36 AM]

Attached file : Screenshot from 2020-02-26 10-27-15.png (52KB - 1025 downloads)

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Bob W

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Subject : RE: ATM Trading Options
Posted : 2/26/2020 11:41 AM
Post #46793 - In reply to #46790

Also I'm using ATM Smart Calls
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Bob W

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Subject : RE: ATM Trading Options
Posted : 2/26/2020 11:51 AM
Post #46794 - In reply to #46790

Thank you very munch.
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jpb

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Subject : RE: ATM Trading Options
Posted : 2/26/2020 11:54 AM
Post #46795 - In reply to #46793

I actually began trading live with ATM Smart Calls yesterday. I use Auto Trade to kick off the analysis process at 2:20 pm CST. It finishes in 10 minutes with orders submitted. I didn't make any adjustments to the trade plan -- just followed the advice to run it near the end of the day as opposed to at market open to avoid the huge spreads.

So far, it has taken one trade for SIRI C 7.5 Mar 13. I am using a small account to limit exposure. It put a total of $44 at risk.

The one thing I did change with ATM Smart Calls was to change the list. Nirvana used a static list created from the Import List function into My Symbols. I switched it to use OmniScan and populate it with S&P 100 Stocks and NASDAQ 100 Stocks which is what I think was highlighted in one of the webinars. In testing, it produced similar results to the static list. There were however about 10 differences in the list. It dropped a few of the indexes and the SPY which was part of the list, dropped a few that OmniScan doesn't recognize being part of either of those lists and added one symbol if I recall. It came up with 175 symbols. This just gives me the latest list without having to make adjustments over time.
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Buffalo Bill

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Subject : RE: ATM Trading Options
Posted : 2/26/2020 1:12 PM
Post #46799 - In reply to #46795

Trying to do the same as ya'all - use ATM3 autotrade to dip my toe into options. Want small trade sizes to see how it works

Wondering what position sizing methods you're using and why?
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jpb

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Subject : RE: ATM Trading Options
Posted : 2/26/2020 2:27 PM
Post #46800 - In reply to #46799

For ATM Smart Calls I'm using it out of the box. With AutoTrade, I'm using the Method (ATM Smart Calls). Looking in that method, it is using a 1% allocation based on % of Equity.

My specific account that I'm letting it trade live against is small -- around $5,500. That means it is only going to select options with a max price of about 55 cents. I do have 2x leverage on this account and permit Auto Trade to use 195 of 200 max. That does mean my price may go to almost $1.10. As ATM Smart Calls proves itself, I'll add funds to the account to allow it to trade higher priced calls.

In my testing, using my standard $10,000 account size with 2X leverage, it looked like trades were typically being taken with a price between $0.50 and $1.75. I didn't look too closely at this since I just wanted to make sure it wasn't trying to chase a $10.00 option. If I saw that, I'd have added some limits (in the search function) to the trade plan and activated the option search functionality. But since it looked to behave well without any of those settings, I decided to leave them alone for now.
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Barry Cohen

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Subject : RE: ATM Trading Options
Posted : 2/26/2020 4:54 PM
Post #46802 - In reply to #46800

I do have 2x leverage on this account and permit Auto Trade to use 195 of 200 max. That does mean my price may go to almost $1.10. As ATM Smart Calls proves itself


Just a quick comment, Jeff. When AutoTrade is used to trade options, margin/leverage is ignored, so 100% is the max equity it will use. If you set AutoTrade to 200% it will still use 100% for option trading.
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jpb

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Subject : RE: ATM Trading Options
Posted : 2/26/2020 5:23 PM
Post #46803 - In reply to #46802

Excellent! I was concerned about all the leverage. Now I can see how a mixed options and equity blended set of strategies works with ATM and AT.
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John W

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Subject : RE: ATM Trading Options
Posted : 2/26/2020 5:59 PM
Post #46804 - In reply to #46790

I live in a time zone that requires me to use a mechanical entries.

About 4 years ago I converted a lot of strategies to run options mechanically.

My first mistake was to trade right at the market open.
I lost my shirt almost immediately.
Spreads at market open are outrageously large except on a select few options.

The second mistake was to assume I could exit an option position at a reasonable price when a stop was hit.
Often whenever my stop was hit it seemed that everyone else was jumping ship too.
Spreads again were often outrageous, even well after market open.

What did I learn?

1. I stopped trading options.
I'm now actively researching re-entering options with the new Nirvana tools, they look very promising.

2. There are a limited number of stocks/ETF's that have a tight spread.
The best way to find and validate them is to use Omniscan to dynamically search call and put volumes to find the top 20/30 symbols that are "hot" at the time.
This is great for back testing.
I no longer have the exact searches, but there are 4 formula building blocks for each of the call and puts.
Refer CallOpenInterest(); TheoreticalCall(10); CallVolume(); and CallValue(in the money, strike, expiration,roll) as examples you can play with to come up with suitable dynamic lists for trading.

There are always a select few symbols in the top 30 group but you'd be amazed at the other stocks that come and go.
Beyond the top 30 actively traded options the spreads are highly variable and suspect.
If I had a recommendation I'd probably restrict to the top 20 most liquid options.

3. Trade after 0955am when spreads have normalized.

4. The new trade plans and search procedures to only trade options with tight spreads are wonderful tools and need experimentation to find the right answers for each trader.

We all have different trading objectives and approaches and I know there are others who will offer their wisdom that may differ from my observations, so none of this is gospel, its just one man's experience.

5. I'm not yet trading the new option strategies but am researching and developing to make sure my market entry fits with those rules above.

These trade plans take time to do properly..

I've learnt through 20 years of trading for a living that the market is unforgiving and relentless, and when I put my money on I'd better have all the angles well researched and covered or I'll lose another shirt!

I hope my experiences help you in developing your approach to trading options.
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Buffalo Bill

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Subject : RE: ATM Trading Options
Posted : 2/26/2020 9:41 PM
Post #46806 - In reply to #46804

Love to see how some of those OS filters for CallOpenInterest(); TheoreticalCall(10); CallVolume(); and CallValue (in the money, strike, expiration,roll) might be constructed.

Seems like open interest and vol would be the most important. But what are good values to use?

Instead of culling the focus list directly you could build them as filters in each strategy as well.
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John W

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Subject : RE: ATM Trading Options
Posted : 2/27/2020 3:49 AM
Post #46807 - In reply to #46806

I've had a look to see if I still have those custom Omniscans from about 5 years ago, but they have been overwritten.

CallOI() - you could try looking for greater than (say) 500,000
and then use CallVol() in the sort field descending to filter for the top 30.

You could also try a simple liquid stocks sort filter such as SMA(C*V,10) and use the top 30.
This 2nd formula may even be better than the first, it needs to be researched.

SPY is by far the most liquid symbol to trade so don't forget the ETF's - a good starting list is All US Stocks & ETF's with weekly options.

Compare the 2 approaches and see what you like best, or even develop a combo.
I'd use just a normal todo list run to start and when you are happy with an approach then extend that to a dynamic run to see if that approach has merit over time.

Bear in mind that when you restrict to 30 symbols that you will need to add more strategies to get a reasonable number of trades.

I also suggest looking in detail at the option chains when in option trader, its very illuminating to review various strikes and see the volume and open interest at those strikes.
I had no idea how thinly traded some option strikes are until I looked into the detail.

A simple short cut for those who don't like number detail is to plot Call Open Interest and Call Volume on a chart (right click > Add Indicator > Option Module).
Just click through the charts and be surprised e.g. look at SPY, AAPL then look at AVGO, both are in the 187 symbols set that we regularly use.
SPY - Open Interest 7,413,000; Call Volume yesterday 1,459,000
AAPL - Open Interest 1,541,000; Call Volume yesterday 516,000
AVGO - Open Interest 83,000; Call Volume yesterday 8,000.

The 20th traded symbol using the first filter I suggested at the start of this message was EEM.
EEM - Open Interest 4,025,000; Call Volume yesterday 207,000.

Notice how rapidly the liquidity declines, the 20th most active symbol yesterday had only 15% of the volume liquidity of SPY.
The 30th most active (DIS) had only 7% of the volume liquidity of SPY.
AVGO had 0.1% the volume liquidity of SPY.

In this example, trading AVGO options at this time could cost a trader his or her shirt!
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Buffalo Bill

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Subject : RE: ATM Trading Options
Posted : 2/27/2020 10:21 AM
Post #46808 - In reply to #46807

One concern with using Omniscan filtered lists for OI and CV vs using filters built into each strat is the ability to use the new capabilities in ATM3 if you wanted them.

ATM3 looks to combine the best Market state - symbol - strategy combos from the BT to use at the hard right edge. If the Focus list is constantly changing ATM3 will have a harder time building good combos to look to trade. If you build the filters into the strat itself OT will try to trade the best combos but you only enter the trades where the option OI and Vol is also good for example
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gary

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Subject : RE: ATM Trading Options
Posted : 2/27/2020 11:30 AM
Post #46809 - In reply to #46807

John
I am confused about the open interest numbers you are quoting. When I look at SPY open interest for a 13 March call at strike 308, I see open interest of 1184. That would be the one that ATM smart calls would currently signal a buy for. Is the large number you are quoting the open interest for all call options available?
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jpb

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Subject : RE: ATM Trading Options
Posted : 2/27/2020 11:54 AM
Post #46810 - In reply to #46809

I see the same thing. I think John's data is coming from the indicator that aggregates all the open interest across all weeks and strikes.

I think this is where the Daily Volume min/max filters or the Bid/Ask Spread or Bid/Ask Spread % filters in the option finder settings would be helpful to find more actively traded options.

I haven't yet found where I could set something that would say "don't trade this option unless there is an open interest of at least 100".

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John W

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Subject : RE: ATM Trading Options
Posted : 2/27/2020 2:23 PM
Post #46811 - In reply to #46810

Yes that data was EOD and is from Nirvana's open interest and volume indicators which is the sum of all open interests and all volume across all call option strikes.

Conceptually the same as looking at volume EOD to see how many shares traded during the day.

My simple calloi() and callvol() example was to identify symbols likely to have call options that are well traded and available strikes, so when you place trades you've got a good chance to enter and exit at reasonable fill prices.

I like your idea to have a Nirvana indicator "don't trade this option unless there is an open interest of at least 100".



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Bob W

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Subject : RE: ATM Trading Options
Posted : 3/13/2020 8:00 AM
Post #46860 - In reply to #46790

I now get this message after running AT. AutoTrade Entry failed; Account: xxxxxxxx, Symbol: BK, Tradeplan: (Strategy), Strategy: CRSI, Error: You have an order in your plan that will not succeed due a quantity less than 1 share\contract.
Make sure your initial quantity is enough to prevent this or remove the condition..

Using Smart Trade & % of Equity. I Have plenty of buying power. Any ideas?

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Barry Cohen

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Subject : RE: ATM Trading Options
Posted : 3/13/2020 9:01 AM
Post #46861 - In reply to #46860

Port Sim calculates to the share rather than to the contract. Since 100 shares are necessary for 1 contract, it has determined the trade size of that trade is lower than 100 shares. In AutoTrade's settings make sure round to 100 is enabled & that should help most cases.
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Bob W

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Subject : RE: ATM Trading Options
Posted : 3/17/2020 8:39 AM
Post #46868 - In reply to #46790

Got the same message today.
AutoTrade Entry failed; Account: UXXXXXX Symbol: TSLA, Tradeplan: (Strategy), Strategy: CRSI, Error: You have an order in your plan that will not succeed due a quantity less than 1 share\contract.
Make sure your initial quantity is enough to prevent this or remove the condition..

AutoTrade Entry failed; Account: UXXXXXX, Symbol: TSCO, Tradeplan: (Strategy), Strategy: CRSI, Error: Margin = 0 for the symbol 'TSCO'.

I have these settings on Auto Trade; Max % of Equity:190, Method: ATM Smart Trade, Round to 100, Trade Plan: Strategy

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Hafnium

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Subject : RE: ATM Trading Options
Posted : 3/17/2020 5:27 PM
Post #46869 - In reply to #46868

Hi Bob

Just a thought...

If you are running the standard Smart Calls ATM method, the allocation is set to 1% per trade. Is 1% of your equity enough to purchase the option at the Option ask price? Given the heighten volatility long options are a little rich these days....

ps. Leverage is not used in option purchases. So you do need to look at 1% of your equity value





[Edited by Hafnium on 3/18/2020 2:13 AM]

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Bob W

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Subject : RE: ATM Trading Options
Posted : 3/18/2020 7:59 AM
Post #46870 - In reply to #46790

Thanks but I have plenty of buying power.Over 15,000 in cash.
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Buffalo Bill

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Subject : RE: ATM Trading Options
Posted : 3/18/2020 10:08 AM
Post #46871 - In reply to #46870

FFT

I use IB

If with IB I have a $15k acct and use 1% allocation then I have allotted $150 per trade. So for 1 contract - 100 shares - each option has to cost $1.50 or less to buy (100 x $1.50 = $150) so you're limited to that price range. Volatility is high therefore Opt prices are up - my ATM method bought MSFT calls today and they were much more than $1.50 each.

You may be able to get that low of an Opt price by buying longer term calls, but if you're trying to buy 14 days out it will be hard right now. Another possibility is buying options that are OOM by a buck or two. I'm paying more for ITM +1 but like the results better than OOM.

FWIW
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Bob W

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Subject : RE: ATM Trading Options
Posted : 3/18/2020 12:22 PM
Post #46872 - In reply to #46790

I use IB Have a margin account with current buying power of 138,811.00 I have it set to use 190% of equity. 90% of 138,000.00 is 124,200.00. I would think this would b enough.
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Buffalo Bill

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Subject : RE: ATM Trading Options
Posted : 3/18/2020 12:39 PM
Post #46873 - In reply to #46872

No margin used for options, so only your actual $ is used to determine the 1%
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Bob W

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Subject : RE: ATM Trading Options
Posted : 3/18/2020 12:49 PM
Post #46874 - In reply to #46790

How do I change the 1%?
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