We’ve had some great Community discussions about how to combat abnormal price fluctuations, specifically erratic wide bid/ask spreads. The goal is to let you filter market prices for more consistency.

The new SmartPricing final price setting gives you more control and provides increased functionality so you can define how much slippage you’ll allow relative to the position’s mid-price.

Mid-price controls to avoid slippage

Set your maximum slippage as a Final Price in an Open Position action before entering any trade. This ensures the final limit order used by SmartPricing will not be more than your defined value from the position’s mid-price.

For example, assume a short put spread has a wide bid/ask spread:

• Current Bid: $0.20 
• Current Ask: $1.10
• Mid Price: $0.65

Even though the current mid-price shows a profit of $0.25 ($0.90 - $0.65), if an order is filled at the ask, what looked like a winner would become a loss of -$0.20 ($0.90 - $1.10). With the new guard, you could set the max slippage.

Sudden periods of volatility can occur in even the most liquid ticker symbols, causing an option contract’s premium to increase temporarily. When the bot evaluates a position’s returns, it uses the mid-price to check for a profit target.

However, when the bid/ask spread widens, it may cause SmartPricing to go far beyond the mid-price,  turning what looked like a winner into a loss.

Now, you have the power to customize how far SmartPricing will go beyond the mid-price to control slippage. So, no matter how wide the bid/ask spread gets, SmartPricing will always stay within your defined range from the mid-price when checking for a profit target or stop loss.

Bid/ask guard

Sometimes pricing is volatile and bid/ask spreads widen. The new bid/ask guard lets you ignore these situations until pricing becomes more rational.

You can automatically disable Exit Options in an open position action if the bid/ask spread exceeds your defined value. If the bid/ask spread is larger than your acceptable price, Exit Options won’t send an order. It also won’t record the position’s high or low.

For example, if the Bid/Ask Guard is $0.20, and the spread is $0.08, the position’s bid/ask spread is lower than the guard’s value. Exit Options will continue to run, and the position's high % and low % are tracked.

If the Bid/Ask Guard is $0.20 and the spread is $1.23, the bid/ask spread exceeds the maximum allowable value. Exit Options will be temporarily disabled and the position's returns will not tracked until the bid/ask spread comes back inside your target range.