Lesson Overview

Creating Automatic Alerts

One of the best ways that you can learn to become a more robotic trader when placing entry and exit trades is by using automatic email alerts. We will often create alert triggers at different price points at which we want to get into or out of the stock. This also could trigger us as to when we might need to make an adjustment to a current working position that is going against us. The beauty of using automatic email alerts is that there is little room for your emotions to get in the way, because the alerts will let you know when it's time to make a trade and as long as you act on those alerts you'll be a much better trader.

Show Video Transcript +

Today, I wanted to show you how to create alerts inside of your broker platform. And we can do this inside Thinkorswim, but most platforms have this capability as well because alerts are a really good way to systematize the process that you use for making trades because alerts can remove your emotion and allow you to be more mechanical.

And as I like to say, a little bit more robotic about how you go about making trades. This is a trade that we just literally did in our brokerage account here with an iron condor in RUT, and we sent out that alert to members and just did this trade for February expiration, took in a nice fat credit as implied volatility is high of about $380.

But what we want to do on top of this is setup an alert to make adjustments to this iron condor trade. What I’m going to do is go in here to the trade tab for RUT (and you can see it up here on the top of the screen), and I want to scroll down to the short strike of the premium that I've selected.

We’ve gone a little bit tight here with about the 20% probability range on each end. You can see here because implied volatility is high, we’re just coming in a little bit closer, taking in more premium.

We traded on the put side, the 1100 puts and the 1090 puts. Then on the call side, we decided to trade the 1250/1260s above the market for RUT. And you can see it's about the same probability level on each end.

We’re trying to make this as balanced as possible. But as we start to see the market move, we want to make sure that we’re just alerted if the market goes one way or another towards our position. For us, that’s going to be right now about a 30 Delta.

These positions are about a 20 Delta each, the call side is just a little bit higher than 20 Delta, but we’re going to create an alert on each side of this trade, so that if RUT rallies too low, that creates a 30 Delta for this position where it’s currently at a -19, or if it rallies too high, rebounds too fast and our topside of our trade becomes a 30 Delta, a bit 12.50.

Then we get an email alert which is going to trigger us to then make a trade or an adjustment to this strategy. In this video, we’re just going to create that alert. We’re going to right-click on that actual short strike, for now, the 1100 and we’re going to go down to create an alert.

Now, an alert box is going to come up, and it’s going to talk about the market data, but what we want to do here is we want to be notified when the Delta of the position… We’re going to change notify when the Delta of the position is at or below in this case.

Now, the reason that we do it at or below is that we’re dealing with the put side. We want to see, is that Delta going to be even more negative than it is right now. It’s at -18. We want it to be below or at -30 for us to get this alert.

For the put side, we want to be at or below. And what we’re going to do here is just type in a 30 Delta, and that’s going to fix that price at a 30 Delta, and that’s all we have to do.

It’s going to notify us through email, it’s going to submit this order right now, and it’s going to continuously work until that trade reaches a 30 Delta. We’re going to go ahead and create that alert. And as soon as that alert starts to go into the market, we’ll get a little icon that’ll pop up next to that.

Now, the same thing on the call side, what we want to do is we want to go to the short strike on the call side, we’re going to right-click, we’re going to go down to create an alert.

Now in this case, it already pre-defined the Deltas for us, so what we want to do on the call side is do at or above because with call options, we know that the Delta is typically rising if the position is going against us.

We want to change this from a 23 to that 30 that we had talked about before. We’re going to type in 30 there and that's going to create that alert, it’s going to notify us through email should the trade start to go against us above our strike price.

Now, both of these orders are now working in the market, so we have two different alerts that are in our position. If we go back to the monitor tab now, you can see that we’ve got these alerts and they’re right here on the left-hand side of the screen.

So you’ll know inside Thinkorswim at least that these alerts are working and they’re tracking the market right now. Our goal at this point now is to leave the trade alone. Not touch it, not have to monitor it.

You don't have to check it every single day. We want to let the trade work and let the probabilities work out over long periods of time. It’s a very small trade for us, so it’s only one lot, but a wide iron condor on RUT.

And if we don’t get an alert, then everything is really good, and we’ll continue to make money on this trade. If we do get an alert, then we’ll use some of the strategies that we’ve talked about here inside the platform in the membership area to adjust this particular trade and iron condor.

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