Smart Stops: How to use them in an intelligent way
SmartStops is not the traditional trailing stop. SmartStops is a proprietary feature that can alter how you exit positions. Discover how SmartStops could be a game changer for your portfolio.
Our automated trading platform opens up a new world of opportunity and flexibility for traders. SmartStops, one of many exciting features on the forum, is a favorite!
What is a SmartStop
SmartStops is not the traditional trailing stop. SmartStops trail a position once a target has been reached.
What does this mean?
You can, for example, set a target of 50% profit on a credit spread put with a trailing stop of 10%. SmartStop will trail the position by 10% after reaching a gain of 50%. SmartStop starts following the place at 40%, 10% less than the profit target.
This is a game changer because the traditional trailing stop begins when your order is entered.
BeforemartStops y, you would have trailed a position immediately if you had entered a job with the traditional 10% trailing stops. The initial price movements of the ticker can cause you to exit a job even before it is fully operational.
You can manually enter a GTC (manual) order if you want to achieve a profit of 50%. The profit cap is the order price. No longer.
SmartStops can be used to automate your processes.
SmartStops can help you get more from your high-probability trades
High probability spreads on put credit are a common option selling strategy. The strategy aims to benefit from theta decline and decreased volatility throughout the work.
Trades with high probability are often closed too early to tilt the odds of success toward the seller. These trades can leave a lot of credit unclaimed.
You can now choose to get even more out of your trades. Add a SmartStop to a Monitor Automation that will trigger at the strategy’s usual price target.
You could trail your 50% profit target to 10% if you usually exit a credit put spread at 50%. You can then take advantage of time decay and decreased volatility once the initial price target is reached.
The position close action is initiated if the work reaches its price target.
Add additional closing criteria to increase automation flexibility.
SmartStops can be grouped with other decision recipes
Traders have two price levels where they will be correct (profit target) on a trade and another at which they will be wrong (stop loss). Can you automate them both? Yes, you can.
SmartStops can be used with the Evaluating position performance decision formula to automate both the stop loss and the trailing profit targets.
Decision criteria make bots dynamic and give you complete control over the functionality of Automation.
You can check in one bot decision block if a position has fallen behind a 50% target or its premium has increased 100% since the place was opened.
You don’t need to worry about closing your position when you reach the profit target. The bots do all the work for you.
You can also set a target, a trailing percentage, or whichever position performance criteria you like!
Use multiple SmartStops depending on the days left until expiration
As expiration approaches, traders tend to treat positions differently. You may lower your profit goal if the expiration date is just a few weeks away. SmartStops can be used in multiples, depending on how many days are left until expiration.
You can add a SmartStop in the Automation Editor with a lower profit goal if the number of days left until the expiration value is below a certain amount.
You may, for example, typically exit short-put spreads with a target of 50% (and follow it up with a SmartStop!). If the expiration is within 30 days, reducing your profit target may be a good idea.
You can create as many SmartStops as you want based on criteria like the number of days left until the expiration date and the probability that the position will end in the money.
You could also use a similar logic using the Comparing position duration recipe to close a trade after a specified number of days. There are many possibilities!
Bonus
You may have a trade, and everything goes well. You want to close a position because it has exceeded your profit target. Can you automate this scenario? You asked a great question!
You can group SmartStop with an Evaluating Position Performance to establish an absolute profit goal.
The bot can, for example, check whether the spread on a short put is 10% behind a target of 50% or if the premium on a position has dropped by 65% since the trade was made.
You can combine a SmartStop with an absolute profit target or a stop-loss, an expiration filter, and many other options.
“SmartStops is a game changer.” Monitor Automation allows you to delegate position management to a bot. SmartStops go one step further to optimize your exits and generate higher returns.
Check out the Option Alpha Podcast to learn more: How To Use SmartStops
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