About this template
Description: This hybrid trading bot manually enters and manages a synthetic long (SL) or synthetic short trade (SS) also known as bullish/bearish risk reversals. SL's or SS's are advanced strategies for traders who like to take advantage of extreme moves in an asset's price outside normal ranges as they expect it to mean revert by entering a pair of near ATM trades: 1) long call+short put to create a synthetic long OR 2) long put+short call to create a synthetic short. Given that we trade risk defined here, we convert the short put/call into spreads by buying the .05 delta wings.
This strategy is best used in markets when volatility is very high and TA indicators (e.g. lower/upper BB, RSI,CCI, Stochastic etc.) show the extreme move will likely revert creating a swing trade opportunity. The reason this is an excellent strategy in these situations, is that it is very capital efficient because the high vol allows you to fund the long call/put with a short option for which you collect a rich premium and your outlay is minimized to get long or short depending on your directional view. Expiration is 60 days or more out to minimize time decay in the long option and so you have time for the directional view to play out. Since we have to buy the .05 delta wings it will have a larger outlay than normal but it should still allow you to enter an efficient trade and you get the benefit of being risk-defined.
Settings: The bot has a maximum of 2 positions which represent either a SL or a SS strategy. Once you exit both positions you can enter the next trade.
Inputs: I created bot-level inputs for the Ticker, entry deltas (SL: long call/short put OR SS: long put/short call), position size, expiration, min open interest, and early/normal/expiration week profit targets. I have inputs for exit options, if you must use them, so the can be set upon entry (BUT I don't think exit options should be on for this strategy as you should look at the Bot level P&L for exit). I also have a switch for automated profit taking to provide an option to manage the trade manually as there are times prefer to manage manually for very short timeframe moves. Finally, I have a switch for early profit taking as there are times I want to be patient and other times when I'm willing to exit early if certain conditions are met.
Buttons (Trade Entry): Entry is manual using buttons to enter a SL or SS when you believe the timing is right. I also have a button to liquidate the position, in case you need it for a position moving quickly against you. The automation notifies you if it is unable to meet the opportunity criteria.
A scanner could be created if one wants to identify entry opportunities but I have found manual entry is best once my TA indicators hit as other variables come into play (macro picture, other negative fundamental reasons for the move etc.) which affects the decision to enter the trade for me.
Monitors: I have Monitors checking if the bot achieves a large daily move to trigger an exit, or hits the early, normal, expiration week profit targets. I also have a bot state tagger which tags the bot with the type position you are currently trading (SL or SS) and if the overall position is profitable. When a position is exited, the bot tags the position to identify which profit level was achieved.
Events: I use these to notify you when a new position is opened and also when the bot closes a position (since both positions need to be closed at the same time). I also tag the position and bot as soon as it's opened.
A few last words. A bot is so useful for SL and SS strategies as, ordinarily, without bots, I found I had missed early profit taking opportunities or I entered a trade that didn't quite meet all my opportunity criteria for unknown (read: emotional) reasons. SL/SS are very high risk/reward strategies so it's especially important to define your criteria and constantly monitor the strategy.
Final Note: This is NFA (Not Financial Advice) and everyone needs to DYOR (Do Your Own Research) before using this bot. It is not for new options traders and is not a systematic strategy. I wanted to share with this amazing OA community as I have done well using it for swing trading or even acquiring stock for my long-term portfolio when markets get irrational and I finally decided to see if I could create a bot to do it.
