So, you’ve found a backtest with great results and want to add it to your portfolio. Before, there was no easy way to replicate a strategy’s settings (and forget about doing it manually). Now there is.
With our most recent platform update, you can instantly create a bot from any backtest inside Option Alpha’s database, giving a whole new world of efficiency and opportunity to our autotrading Community.
Backtesting is a critical component of strategy development. We’ve made it incredibly easy to automate options strategies based on your favorite backtests.
With this new feature, you can create a bot from any backtest in just a few clicks. There are thousands of backtests to choose from, and more are added every day. You can also create your very own backtests for multiple option strategies and allocations. Plus, you can paper trade and test bots before risking any capital.
For example, this IWM iron condor strategy uses:
- Weekly entries
- 10 days to expiration (DTE)
- 0.15 short strikes
- 0.05 long strikes
- IV Rank between 20 & 100
- 25% profit target or 1 DTE exit
We tested an allocation of 1%, 2%, and 3% per position. Again, this is the exact same strategy, just different portfolio allocations.
With any backtest inside the database, you can compare multiple performance metrics for each allocation and choose what works best for you and your portfolio.
Now for the exciting part! Once you’ve reviewed the backtest, you can simply click ‘Create Bot’ to instantly create a bot based on the backtest’s settings.
After clicking the button, the platform prompts you to choose which allocation you want to use for the bot.
Next, you’re taken to the bot wizard, where you can input the bot’s settings.
Once you’ve named the bot, selected an account, and specified an allocation, you can confirm or edit any fields inside the bot wizard.
All the inputs automatically populate from the backtest’s entry and exit criteria.
For example, this backtest entered a weekly IWM position, selling options ten days to expiration with specific deltas and position allocation.
With the bot wizard, you can make changes with the simple, easy-to-use natural language recipes.
Notice in the bottom section of the bot wizard that all the entry and exit criteria automatically fill in as decision recipes. The bot wizard is smart enough to input everything from the backtester when filtering for new positions.
For example, the backtest filtered trades to only enter positions when the implied volatility rank was above 20.
Inside the bot wizard exit criteria, you can see all the different ways the bot can exit the position, mimicking the backtest.
Using the backtest’s inputs, the bot will exit a position if it expires in one market day and the market time is after 3:00 pm.
The bot will also exit the position if the position’s premium decreases by 25%, which would be the 25% profit target.
Again, if you want to make any changes here, like taking out the added time interval, you can edit any of the fields inside the bot wizard.
Once you’re ready, simply hit the button to create your bot.
Your brand new bot is created and instantly added to your selected account! For security and your protection, all automations are automatically turned off by default. This ensures you turn on and confirm the automations before the bot starts running.
Inside the scanner automation, the bot checks all decisions that lead to opening a new position. It checks to see if the bot can open a new position, has enough capital, availability, and frequency, then checks to see if the current implied volatility rank is above 20 and the opportunity you’re looking for is available.
Notice that we intelligently added an additional recipe our users find very helpful to ensure the opportunity is available. If you don’t want to use them or want to add more, you can always edit and modify the bot's actions in the automation editor.
The bot automatically sends an order to your broker to enter a new position if, and only if, all the criteria are met and exactly how you specified in the bot wizard.
Again, everything is set up for you automatically, and you have total and absolute control over what happens inside of your bot.
Once you’re ready, turn on your automations and the bot is active. It’s using the same setup from the backtester, plus any criteria you add.
Of course, we always want you to remember the backtester is just a tool you can use as a trader. Certainly, backtested performance does not mean that the bot and the market performance will behave the same way moving forward.
So, we always encourage you to paper trade all strategies and forward test them inside your account to ensure they behave and perform exactly as you would expect before turning them on in a live account. You can test any automation inside a bot.
It’s always up to you as the trader to determine if the strategy and the risk profile of the particular setup are appropriate for you. You always have control of your bots and automations.
You can turn off your bot at any point and stop the automations. If you turn off a bot, make sure to override any open positions and manage them in your brokerage account. When you’re ready, simply turn the bot on again.
We developed this exciting new feature to streamline the bot building process and enable you to use data and research as the foundation for your strategies. We aim to accelerate and simplify the process of automating any strategy you want. We know you’ll love the added flexibility to edit or modify any of the different bots created using the new bot wizard.
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