Overlapping Strikes Failsafe

The overlapping strikes failsafe prohibits bots from overlapping identical strike prices or splitting apart positions.

The overlapping strikes failsafe prevents bots from opening a position that overlaps another position or splits a position apart. The error occurs if the new position is in the same bot or same brokerage account as the existing position.

An attempt to open a new position that overlaps the strike price of an existing position in the same bot (also known as “leg stomping”) triggers the overlapping strikes failsafe.

This failsafe will only occur if the option contracts have the same underlying symbol, strike price, and expiration date.

For example, “Bot A” has an existing call debit spread in USO with a long $50 strike price, a short $53 strike price, and September 24th, 2021 expiration.

Position details

If you try to open a new position in "Bot A" with an overlapping contract for either leg, you will receive an alert from your broker in the platform.

For example, a new USO position cannot have a long $53 strike price for September 24th, 2021, because the new order interferes with the existing open contract. Opening a long $53 call option would essentially “cancel out” the existing short $53 contract.

Only a deliberate closing order can close a position.

Open position details

The failed position will display an error message stating that the broker would not execute the trade because it would close an existing position.

Error message details

The error position occupies an active position spot in your bot and will count against your total and daily position limits. You must manually cancel the position to create space for more positions.

Cancel position

All bots within the Option Alpha platform operate independently. However, if two different bots are connected to the same brokerage account, the broker will alert you to the error.

For example, if “Bot B” tries to open a position with a long $53 call in the same account as "Bot A," the broker will reject the order.

Error message details

Although bots do not communicate with one another, the overlapping strikes failsafe prohibits the broker from executing the order because the positions are managed within the same brokerage account.

No tags found.
Was this helpful?


Related articles