Entries & Exits
Advanced Contingent Orders
So you work a day job and want to trade options for income right? Who doesn't! But you're afraid of not being "there" all the time to make trades. Today I'll cover some more advanced contingent orders that will help you make both entry and exit trades without being right in front of your desk. Master these order types and you will be able to trade effectively without monitoring positions all day long.
In this video, we're gonna talk all about contingent orders and using some of the very, very high-level specifics on creating these contingent orders to do pretty much anything you want them to do while not being at your desk, while not trading and having your day job. And that's really what it gets down to.
Now, I'll make this one big ... kind of disclosure at the beginning of this video and that's that this is worth that you need to put into it. I mean this is not something with these contingent orders that you're gonna whimsically do.
If you do truly want to make options creating work for you and make that side income then you're gonna have to put a little bit of effort into this and kinda really take the steps that are necessary to learn how to use these orders and place them in the morning before you go to work and kinda monitor them at night before or after you get home from work.
But this is not one strategy that just kind of catches everything out there and solves all your problems with trading and it's an automated system. It's not anything like that.
It still requires your interaction and your intervention to make it work but, that said, there's a lot of easy ways to make the market do - place orders the way that you want the to when you're not even at your desk, and I want to go over that today so that you guys can see how to make these contingent orders really work for you when you're working.
So, I brought up a chart here of Tesla, and it really doesn't matter what stock we're gonna use as always with these tutorials but in this case Tesla's trading today has been pretty active it's kinda all over the map and lets just say, for example, that you want to trade a vertical call spread in Tesla but you're at your job or whatever the case is, market just opened, you gotta go to work, or you're on your lunch break, smoke break, whatever the case is and you wanna trade a long call spread in Tesla.
So we're just gonna go here, and we're gonna add an order to buy vertical or a long call spread for June expiration. So, you see here we have the call spread it's 2.05, 2.10 and the price right now is actively trading around 2.50 which is ideally where we wanna make this trade right?
Now, what happens if you enter this trade and you get filled right away. Well now you have an active position, but you're off to work, and you can't monitor that position right?
And this is what happens to people; they either can't enter the position A or B they can't monitor a position once it's entered, so they don't know at what point to take money off the table, they're not there to watch it, etc.
So, here's what we can do. We can enter a contingent order or a sequence of orders to go into the market, in lock step. Now., here's what happens with that.
So, in this case, we just have one single order right now so, it's just the actual order for a 2.48 debit, and down here in this advanced order feature field, you have this other tab where it just says single orders.
So, that means that this order is kinda nothing attached to it, it's not linked in any way, shape, or form to another order. And again it's only day order, so it's only working for today.
If you wanted to do GTC which is good till canceled or good till continuous, then that is another way to do it where you can just kinda make this trade and whenever it gets filled it gets filled whether it's today, tomorrow, next week, whatever the case is.
But since you're still working, and you can home and watch these or watch them in the morning then you know you can just do a day order and make these trades and see if they fill during the day.
But if you have to run right now and you wanna make this trade then what we'd wanna do is we wanna set up in advance an order than will sell out of this position today if Tesla meets certain criteria.
So, in our case, we would wanna sell out of this call spread if Tesla rallies and the price of this spread goes up but how do you place that order without first making a sell order that just gets executed in the market? Well, there is one way you can do it, and that's with contingent orders.
So, what we want to do is go down here and click on the advanced order, and we want to first trigger a sequence. So, that's what that means, it says first triggers sequence, and what that means is that this main order up here - once this order gets executed then a sequence of orders behind it will get executed as well.
Or will start to be working orders whether they get executed on price, but this now links this order with another order in the future. So, we're gonna go right back up to our chart and say okay now we want to go ahead and sell this spread as well.
So, now we have an order that's also popped up below our first order to go ahead and sell out of this spread. Now, because I am buying one spread and selling one spread, you notice that the price is about a dollar- a penny wide you really can't take advantage of it because it's currently at market price.
But instead this sequence order, which is now linked, now this category here says that this sell order is now linked to this main order right above it, so this sell order will only get executed and be working if, and only if, the first order to actually get into the trade begins, right?
So, you'll know that you won't be selling a credit spread without first- or selling out of your position without first actually being in a position, to begin with.
Now, if we take a look at some of the different things that we can do, we can go up here and say ... we can do main order, and we can say, you know what, I wanna sell out of this order in the future if Tesla goes up to a three dollar credit.
So, this is a very common, very easy way to get into the trade today at 2.40 and then as you're at work or whatever you're doing, even if you're out for the day with the kids or the family, you can set up this order to say, you know what, if I get in here at 2.48 I absolutely want to automatically create a sell order at 300.
So, that means that if Tesla goes up to a credit of 300, I'll automatically sell my position back to the market and bank the difference in profit or about fifty dollars. So, that's the first way you can do that contingent order.
Another way that you can set it up is you can do what's called a trigger. So, you can do a trigger that's based on percentage. So, you wanna, you know what, I wanna make at least four percent on this trade, so whenever I get executed on this trade, I want to at least make four percent.
So, whatever that price point is in the future, then that's the price point in which I get out of the trade, or I wanna make a credit od two dollars more than what the price of the security is right now.
So, whatever I get into, I wanna make a credit, or I wanna get out of it a credit of about two dollars more. So, you can easily see how these contingent orders can be layered upon layered on top of each other in a sequence to get and out of trades during the day.
So, this is a really good example, pretty self-explanatory of how you can get into and out of a trade and kinda position yourself for an exit without even being involved in the market.
So, sometimes what I do is I'll enter these trades if I have to go out for the day and I won't be there for the market open or if I'm taking care of my daughter then what I'll do is I'll enter some of these trades that are contingent.
And I'll say I wanna buy this spread but only if it gets down to x price and I wanna automatically set up a trade so that if I get into that spread that I get out at a certain profit point before I even have time check it.
So, there's been a lot of cases where I've had both of these orders filled during the day, and I was never around to see any of them but they met my criteria for execution, and therefore I was able to quickly get out of them.
Now, one other feature that I wanna go over tonight in addition to these contingent orders- I'm sorry- two other features that I wanna go over in addition to these contingent orders for new orders is this super-advanced feature on Think or Swim.
And I wanna bring up this order rules dialogue. So, I got to it by clicking all the way on the right-hand side of the screen. It may not be in the video, but there's a little gear box next to the actual order and what this does is it brings up an even more advanced order rules section of the platform.
So you can create this ordering rule that enters this order at a specific moment in time or cancels it at a specific moment in time.
So, this is where this comes into play is if you have earnings or if something you know is gonna happen or if-if you know you're gonna be back in time or if you know you wanna enter this order at the end of the day.
You can set up order conditions that say, you know what, go ahead and submit this sell order only on 5:30 at the end of the day or go ahead and cancel this order if it hasn't been executed on 5:30 at the end of the day.
And this creates another layer of contingency, so you can almost pre-plan out every possible scenario that might happen with your trade and almost pre-plan out the orders that you want to go out.
Now, you can also do what's called order conditions in specific market conditions. So, in this case, you can say, submit the order at a specified market condition.
So, submit when at least one of these triggers is met, and you can do up to three market conditions. So, in this case, because we're trading Tesla, let's say we wanna say we will only submit this order if Tesla reaches or below- let's do at or above- so cuz we want it to rally.
If Tesla only trades at or above let's say 2.15. And so we put that in there, and now we have 2.15 as our threshold. So, we will only execute this sell order if Tesla trades up to 2.15. Now right now it's at 2.08, and it's working in the market.
So, you can see that you can do this on specific market conditions. So, you can tell the market to place your orders for you but only when it reaches certain criteria.
So, this is an advanced way of trading, and now that we've gone through this I wanna show you guys what the best feature of this -of all this- is. And that is the ability to save this type of order.
And so what you want to do is that you've created all the different contingencies, you kinda like it, and you've been using it back and forth and using it for a couple of days and you now have some of the particular items that you want to be, saved so you don't have to keep going in here and re-creating it, right?
And I understand because that's a big time hassle and you've got a job that you need to work, and you wanna be in and out with your trading.
But what other features you can do is that you can go down here in the bottom right-hand corner and right by your button to either delete the order or confirm and send you can click that icon and save this order as a template.
So, I can go in here to save a new custom template and say Kirk's new vertical spread trigger, right? And I can save that right and say that every time that I wanna enter that trade I bring up this order template and it kinda already lays the foundation, it kinda already does most of the dirty work for me and I can just adjust prices along the way.
So, that's a cool feature that Think or Swim has where you can save the custom template of the order. All right. So the last thing I do wanna go over tonight is I want to go over closing trades. So, this is another big one. So, say you get into a trade, and you're kinda having a trade working right now.
So, we, for example, have a short put spread in Bank of America right now that's actually doing fairly well and we're making some money in it but we wanna make a trade that has the potential to actually make some money and want to kind of leave this trade on but not have the ability to actually monitor it during the day.
So ... let me just bring you this order graph again. And we want to get rid of this Tesla trade here ... so we just wanna get rid of that ... perfect. So, now we just have the Bank of America trade.
We sold this spread originally for around thirty cents, it's now trading at around 19 cents, but it's just not quite at the price point that we want to get out of it. So, we still want to have some opportunity, but we can't have- we don't have the time to watch it during the day.
So, what we're gonna do is we're gonna go in here and place this trade as a fifteen cent debit, and we're going to go ahead and select good till canceled. And what that means is that we're gonna let this order keep working until it gets filled at fifteen.
And this is a super easy way, and some of you that are more advanced already know this, but this is a super easy way to let the market manage profits for you.
So, you put in your profit target and place the order good till canceled, meaning that it's gonna keep working until that profit target gets hit.
And you place this order, and you set it and forget it, right? The old, the chicken bake oven, right? You set it and forget it. You place this order on the market; it will always work when the market's open, and as soon as it hits that fifteen dollar debit and you have the ability to get out of the spread.
Then the market will take you out of the spread even if you're at your job. So, this is a really good way to use a contingent order to manage your expiration, or manage your exit, in a trade and get out of a trade without even being involved in your trading platform.
So, at the end of this video, I wanna talk about another great tool that we don't cover here cuz we don't have the ability to see the screen to do it, but that is these mobile trading apps.
One of the articles I wrote just the other day on the blog is talking about using your mobile trading app now when you're at home to make those trades.
So, what I've told coaching students forever is that what I do now is I will start to learn this mobile app even better by going in and looking and analyzing the trade right here on the Think or Swim platform.
So, taking a look at everything I wanna do, the quantity, the symbol, the expiration month, the strikes, puts, calls, debits whatever the case is and I take all of this information here that I look at on the actual tradings desktop platform and I convert it into my mobile app and I start learning how to make trades on my mobile app even though I'm sitting right in front of the computer screen.
And this is helpful, and I know that a lot of coaching students have found it helpful cuz they still work day jobs, they still have a job where they require a lot of activity, and they don't have access to their trading platform everyday and ... every minute of the day ...
And so this has been helpful because if you could start to learn this mobile trading platform then when you have orders you can quickly go into your phone and get out of orders, or get into a new trade, or hedge a trade, or adjust a trade right on your mobile platform.
And I think it's helpful if you can do both of them at the same time, to begin with, so that you make the right decision, right? That you're trading the right contracts, that you're trading the right strikes, the right expiration month, etc.
And you get familiar with your broker's mobile trading platform. I know that TD Ameritrade has a great mobile trading platform and they keep updating it every time. It's got amazing charts, amazing features.
Of course, there are things that they can add to that platform but it's just really, really, good as it is right now and I'm starting to learn more and more about it that allows me to get out of the office myself and not be stuck in the office looking at trades every single day on the actual desktop. I can now look at them on my phone.
So this is a great video tutorial. I hope it was helpful. If you have any specific questions on different types of orders because we only covered a handful here, but there's a lot of different contingency orders and different triggers that you can place on the market.
Please go ahead and go to the main area of the membership site, ask your question below in the comment box. I'll get back to all of those and get all those answers to you guys right away. As always, happy trading.
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