Advanced Conditional Order Set
Advanced Conditional Order Example:
We found ourselves in a Double Diagonal trade that wasn't going anywhere so we wanted to place an advanced conditional order that would both remove the position if the market price of IBM went too far, and also automatically remove the position with a small profit if the market price dropped slightly.
Here is a screen shot of our position when we placed this advanced conditional order.
The 'exit window' for a Double Diagonal is normally 20 to 25 days, and we were in this trade for 17 days. We had another week + to safely stay in this trade.
Since we started this trade, both an increase in the price of IBM and a small drop in the volatility meant that it wasn't possible to make an early exit. (An early exit would have allowed us to place an additional trade the April expiration.)
Let's Open the Exit Door:
We wanted to give this trade a chance to exit automatically with a small profit so we can free up some maintenance money for the up coming May Expiration Options.
To do this, we made 2 changes to our conditional orders:
(1) We tightened up the down side conditional order from 188 (the Break Even point) to 195 to give us a little more protection if IBM had a sudden down move.
[We reset our original up side conditional order at 210. This is less than the Break Even point because we wanted to limit our loss if IBM kept moving up.]
(2) We placed a "limit" order to exit this position if either the price of IBM went down and/or if the IV went up. (If the price goes down, the IV will normally go up: both cases would have been good for us in this case.)
This conditional order is probably the most complex that we place on the Active Portfolio, so we will take it step by step and include screen shots. (It's easy, really.)
Remove your existing conditional order.
Select your positions from the "Trade Monitor" Tab, and "Select Closing Order".
I will set up the closing order for a 1 contract spread as an example. Be sure to adjust the amount of contracts to your portfolio.
(See a video on how to set a basic conditional order.)
On the Trade Screen:
=> ADVANCED ORDER -> Select "OCO". (screen shot below)
OCO means "One Cancels the Other", and it will let us set up multiple orders on the same spread. If one of these orders gets filled, the other orders will be immediately cancelled.
On the Advanced window, make the following changes (screen shot below):
=> TIME IN FORCE -> Select "GTC"
=> BASE ORDER -> Select number of contracts to match your portfolio.
=> PRICE RULES -> Select "MARKET"
=> SUBMIT AT SPECIFIC MARKET CONDITIONS
IBM -> MARK -> AT OR BELOW -> 195.00
IBM -> MARK -> AT OR ABOVE -> 210.00
=> Double check your settings, and then press OK.
Exactly like Step 2. Your screen will look something like this below. Don't worry about the Red warning, we will fix that when we adjust the settings in the next step.
=> TIF -> Select "GTC"
=> PRICE -> $2.65 LMT (We entered with a $2.51 Debit, so this will leave us with a small profit.)
=> Double check your settings, then press "Confirm and Send".
Double check BOTH orders on the confirmation screen, then press "Confirm and Send".
Congratulations! You just successfully set up a very advanced set of conditional orders.
Have a Question? Comment? Suggestion?