New traders with small accounts are constantly searching for options strategies to help get started and allocate money intelligently.
On podcast episode 159, we outlined a framework for building an options portfolio manually with just $3,000. Well, the days of manual trading are over. We've entered a new era with automated trading technology.
With bots, you can now automate the entire strategy.
Plus, you can instantly clone a bot template and add it to your autotrading portfolio.
In this show, we introduce a new bot template that you can clone with one click. We built the bot specifically for traders with small portfolios.
The Strategy
- Scan a list of 10 uncorrelated ETFs.
- Sell up to 6 iron condors, at least 40 DTE, using only monthly contracts.
- Place strikes near the 0.20 delta with exactly $3 wide spreads to control position sizing.
- Take profit at 25%.
The bot is a targeted iron condor strategy built specifically for small accounts of around $3,000. The strategy focuses on selling neutral, out-of-the-money iron condors in a basket of uncorrelated ETFs.
The strategy focuses on high probability trades with defined risk. You can spread your capital efficiently across multiple ticker symbols when you know exactly how much you're risking for each position.
The bot scans through a list of uncorrelated tickers. The bot is deliberately set up to only enter one position in each ticker symbol.
In the template, we've already given you the list of potential ETFs: SPY, TLT, GLD, FXI, XRT, XLP, EEM, XLU, XOP, and XBI.
The Bot
The bot runs two simple automations. A scanner to find and enter positions and a monitor to manage the positions.
The bot has a $3,000 allocation, but we're only going to trade 50% of that allocation and keep 50% of the portfolio in cash.
The bot is set up to enter a max of six positions per day and six total positions. Each position targets approximately $250 of max risk or 8% of the account per position.
Scanner Automation
The template only requires one scanner automation. This scanner loops through your tickers and makes several decisions.
These decisions check to ensure there aren’t any existing positions in a symbol, evaluate the IV Rank for each symbol, and ensure the bot has the capital to open a new position.
The automation also checks to see if an iron condor position is available that meets all the position requirements.
Opportunity Filters
Automated trading enables you to define specific opportunity filters for the bot to evaluate every time it looks to open a new position. The bot will only send an order to your broker if your criteria are met.
The bot uses three filters when evaluating each iron condor opportunity:
- Minimum bid-ask spread
- Probability of profit
- Rate of return
Each decision recipe is 100% customizable using custom inputs, so you can easily modify the settings.
Iron Condor Setup
Since this bot was created for smaller portfolios of around $3,000, we specifically set up the template with default iron condor settings aligned with intelligent risk management.
Our goal is to distribute $1,500 across six iron condor positions at any time. For this reason, we set up our iron condor long strikes to be exactly $3 from the short strikes (when available).
The bot will avoid entering any position when we cannot get a spread width of exactly $3 on each side to keep position size in check with a risk of around $250 per position.
You can always edit the leg strike selection for the iron condor position in the scanner automation settings.
The position size is set to one contract. The target expiration is at least 40 days, and the bot will only trade monthly contracts.
The short call strike and short put strike are set at a 0.20 delta.
Monitor automation
The bot template uses one monitor automation to loop through any open iron condor position inside the bot. Once a position is open, the monitor automatically manages the position.
The monitor automation starts with a position loop and then checks that the position has been open for at least one market day to avoid the Pattern Day Trader (PDT) rule.
Next, the bot checks if the position has reached a 25% profit. The bot automatically sends a closing order to the broker if the premium decreases by 25%.
If the profit target is not hit, the bot checks to see if the position expires in less than five market days.
We also added a "Switch" to exit the iron condor if the underlying symbol challenges either short strike. What's so cool about using switches is that you can turn entire automation sections ON or OFF.
So, if you leave the switch ON, the bot will exit any challenged position within five days to expiration.
If the switch is OFF, the bot simply exits any iron condor inside two market days from expiration.
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