The goal of this workshop is to walk you through the basics of using a monitor automation. These simple techniques that will help you optimize position management.
Learn wicked "smart ways" to use monitors inside a bot, including:
- Dynamically adjusting profit targets
- Managing positions around expiration to avoid assignment risk
- Scaling out of positions
- Adjusting your management strategy based on market volatility
- Leveraging SmartStops to get the most out of your positions
- Using switches to turn certain parts of an automation on or off
- Using tags to organize your closed positions
Visit the Community to see a list of all the automations used in the workshop.
The text is the output of AI-based and/or outsourced transcribing from the audio and/or video recording. Although the transcription is largely accurate, in some cases, it is incomplete or inaccurate due to inaudible passages or transcription errors and should not be treated as an authoritative record. This transcript is provided for educational purposes only. Nothing that you read here constitutes investment advice or should be construed as a recommendation to make any specific investment decision. Any views expressed are solely those of the speaker and should not be relied upon to make decisions.
All right, welcome everyone to the log bot workshop today. We're gonna be doing things all wicked smart automated trade management ideas. Really the focus of this workshop, and sometimes when we do our workshops, we will build a bot. Sometimes we will focus on a particular recipe or particular automation. This time we're focusing on just different ideas, creative things that you can do with your bots in your monitor automations specifically. So how you can get bots help you with trade management.
I think that trade management is obviously one of those things that you can offload to automation. You wanna do it intelligently. My goal here today is not to tell you how to manage your positions. You do that by yourself. My goal is just to show you how you can use the tools that we have here at Option Alpha to help facilitate that and some pretty cool ideas on how you can do some different things with your bots and automations. We're gonna go through a lot of different examples today. I think you guys are really, really going to enjoy it.
So let's go through a couple little slides here first. So you guys can see this, okay. Just wanna give you kind of a lay of the land here for what we're doing. First thing that we're gonna be covering is we're just gonna do a very quick, very basic, should be very simple basic walkthrough of using monitor automations, just structurally how they're set up. It's not too hard, which is basically about three different things you wanna kinda get in generally the same order as you set up your monitor automations. But remember that your monitor automations are there to help you manage existing positions. So that is their goal. Their goal is to help you manage existing positions as you go, okay?
Now the other thing that we're gonna do and the bulk of our time is gonna be spent on going through some. We call them just wicked smart, ways to use monitor automations inside of your bots including dynamically adjusting profit targets, super popular one, like more people should be doing this. Managing around expiration and assignment risk. Lots of different things you can do in that. Exiting in tranches or groups. Super cool idea.
Shifting your entire management strategy around volatility. Super important one. Kind of like really got my mind thinking about this recently with some of the research we put out on analyzing like 20,000 trades that we did on the blog. And just how long it takes in different volatility regimes for things to come around, so do you shift your management strategy based on volatility? Well, you can do that automated. And then using switches to turn off and turn on certain parts or segments of management, and then some other things we will throw in there as well.
So, here's the deal. Here's the first one I wanna show you, and this actually wasn't on the list, but it's something that I think I haven't seen a lot of people do. I've may be seen two or three people do it, so I definitely don't take credit as being the only one to do this. But here's something that you can do with your bots that I don't know why we didn't do this originally, like start telling people to do this or start showing people to do this. But it makes total sense to do this because it's all automated, and you don't have to worry about it, okay?
So here's one thing that you could do with your monitor automations. So this is my little bot that I'm running. The monthly Iron Condor bot from one of our podcast that we just did. And it's got this monitor automation that's in here. Okay? So, again, as I go through this, I wanna just quickly tell you what this monitor automation is and how works for those who are total newbies.
So we have our scanner automation, which is the automation that tells the bot what to do and what trades to get into. We spent entire bot session on it last time, going through the monitor automation itself. Now once the bot opens a position, so the scanner is just kind of doing everything telling the bot to check everything to eventually get into this open position action, okay? That's what we're trying to get to this open position action. Once the bot opens a position, then the position basically gets released into the monitor automations. The monitors start running every 15 minute to monitor existing positions. That's what their name is.
You could think about them as little portfolio managers. You could have one monitor. You could have lots of monitors. There's a lot of things you can do with your monitors. But your monitors are purely there to manage your positions, to watch those positions, watch market indicators, watch out for new positions like you could have them watch out for new positions, but they're really meant to be there to watch your existing positions. So inside of a monitor automation, and I'm gonna zoom out here just for a second, and I'll zoom back in.
Inside of a monitor automation, you essentially have three main components. If you wanna think about it as three main components in your monitor, okay? Now, these don't have always to be in this order. I'll show you some examples as we go through it here today. But the first main component is gonna be the repeater or the loop for your positions. This is really the main one that you should always start with, and I say not like- well, let me say this, not always do you have to start with this, but I'll show you some examples where you don't, but this is the most common one. Like 99% of the time, you start your monitor automations with a position loop, which a position loop, all it does is just it tells the bot, just think about it, telling the bot to pull in information on certain types of positions. You could do it on certain types like iron condors, or you can say, bot pull in the information on every position that I have, whether it's an iron condor or an iron butterfly or a long call spread, or whatever.
I like to be very specific with my position loops because I want the bot to specifically manage different types of strategies differently. That's why you'll probably see a lot of my bot templates that I've shared as having specific monitors for different things that the bot would monitor. So if I have an iron condor, I'm gonna have an iron condor manager. If that bot also trades a credit spread, I'll have credit spread monitors. If that bot also trades long stock, I'll have a separate long stock manager. So I'll have them separated out by strategy type.
You usually wanna start with these with a position loop. Now, after the position loop, that's where you're gonna add all types of decisions. So I kinda think of this as like the second part of a monitor automation is all of your decisions that you want the bot to go through. This could be one decision. It could be a number of branches of decisions. It could branch lots of ways down, like all the way down. You could continue branching and branching and branching. So that's kinda like the meat of your automation. It's literally all of the decisions you want the bot to make. Did I reach a profit target? Am I close to expiration? Should I close if it's challenged? What's the delta on the position? Right? All of those things.
The last component or part of a monitor automation that you probably wanna have obviously is some way of closing the position, some close position action. Now notice you can have closed position actions all over the place, and you could close at different points. Close if I'm challenged. Close if it expires in less than two days. Close if my profit target is hit. Do you guys see how you can have multiple close position action all over the place?
So if you're building out your monitor automations, remember that you typically wanna start with a position loop, then you wanna add a bunch of your decisions, all the different use cases for when you would eventually get to that close position, and then finally you wanna make sure that you actually add that close position action. Tell the bot under what circumstances and what scenarios it can actually close the position.
So here's the one that I don't see a lot of people doing right now, and I think you should implement. I think you could implement it almost immediately if you wanted to. Okay? The one that I don't see a lot of people doing is I don't see a lot of people actually placing a closing order, and again, this is like we didn't talk about this enough, and I will surely start doing this more and talking about it more and updating template around this. But start implementing an actual standing closing order at your main, main, main profit target even if you go down the no path.
So basically, if you look at this automation right here, which is our iron condor manager for three exits. Every single path that the bot can go down, whether I want to close here or not, actually has a close position action. Now, do I want to close the bot under every single circumstance? And the answer is yes if it meets my criteria. So let's walk through this together. First thing I wanna have the bot do is loop through all the iron condor positions, and then, in this case, I wanna check and see if the position has been opened for more than one day. This gets me over the pattern day trading flag for the position.
So now, did my bot reach its profit target? Or did my bot or the position reach its profit target? Yes, then I wanna close the position. Well, that's pretty obvious, right? Do you guys all agree? If the position reaches my profit target, I want to close the position. Well, what if my position doesn't reach my profit target. Well, I wanna ask another question like does the position expire in less than five market days? And if it does, it goes down the yes path and goes through all the other additional decisions.
But what if it doesn't expire in less than five days? What I had before and what I think many of you have is you have this open-ended, no field. So if any of your automations have this open-ended, right? Literally, an open-ended no where the automation just ends, which is fine, by the way. Then the bot ends. It did all the decision-making. It did all the checking. It did all that stuff. Right? So it didn't do anything. It's just gonna wait until the next automation runs before it keeps going forward, okay?
So here's what I started doing with a lot in mind. Because, look, during this time, like, what if the market moves? Right? What if the market moves? So what I've started doing I've started adding a close position action. No, I'm not at a profit target when the automation ran, but I've started adding a closed position action, and then I'll go in, and I'll choose patient smart pricing, and I'll choose my final price as something that would designate like 25% profit, which is what I want for this particular bot.
So what I do is I go in, and I set up a close order, regardless of what the decisions are that if I get to a no-decision where the bots are not actively taking profit, I wanna put in order out there to let it sit. To let it sit for five minutes, and maybe if spreads go really wide, I can work through patient smart pricing just in that time period. Like, just have an order kinda sitting out there in between. And then, I do my final price as the trade price times 75%, which, again, for me in this particular strategy, would be a 25% profit.
So once I save that and add that to my decision tree here, you can see that even down all of my no branches, I still have a standing order at a 75%, which is a 25% profits, 75% of the original premium. I just place a standing order with smart price. That's it. And then I just let it sit. I just let that order sit there even if I don't have all of my criteria met. So I'm gonna save this. I'm gonna go back here so you guys can see the position screen.
So inside of here in my positions screen. If I go XLP right here, you can see today, right? I had my open position two days ago, but then today, look, all I've done is just had a bunch of standing orders at 45, which is 75% or 25% profit target. Just place a standing order. That's all I'm telling the bot to do. Just literally place a standing order. Now sometimes, when the spreads get really wide because we use smart pricing, we can try for that interval, maybe try the bottom field a little bit like see if we can get better pricing on this. Can we try 42, 43, 45? Okay, fine, just try that profit target right there, just for the day.
So you can see that during this time period, all I've done is just simply use bots to my advantage, right? Use bots to my advantage and try to close positions. I'm gonna go into my automation library here, and I have a folder that I already built out called demos, and I wanna go through a bunch of different examples here. So again, the goal here is just to show you a bunch of different examples of how you can possibly do it. Once we're done here today, I'll share all these into the community, so you guys can get a copy of them. Modify them, edit them. They're all monitor automations. Okay? All monitor automations. They're all built for a specific use case, so make sure that you just modify them as you go. Okay? Make sure that you just modify them as you go to fit kind of what you're trading.
So here's one that you could do, and I don't see a lot of people doing this. I wanna start with this one. Dynamically adjusting your profit targets. So one of the things you can do inside of your monitor automation, and let's assume we're trading a short put spread, for example, is you can dynamically adjust your profit target as you go. So think about this logically. This is what I always tell people like if you're trading something 60 days out from expiration, you might wanna take a 50% profit, right? That's your goal. You get into a short put spread. It's 60 days from expiration, whatever the case is. You might wanna take a 60% profit.
So you set up your bot to first loop through all of your short put spreads, then check and see if any positions that you have have a 50% profit. The premium went down, right, for short put spreads, and you have a 50% profit. Well, if that happens, yes, close the position. Of course, that's easy, right? But now, the trade has seasoned there for quite some time. Now you're sitting there. Now you're not 60 days from expiration with all this time in your hands, nothing to do, now you're 15 days or ten days or whatever it is for you. Now you're closer to expiration.
So the next thing you could do is have the bot make a decision where the position expires in less than 15 days. Position expires in less than 15 days. If the position expires in less than 15 days, adjust your profit target. Now you can have an adjustment in here that says, okay, if it expires in less than 15 days, check and see if I have a 25% profit. So now, as we're getting closer to expiration because time is running out, had we left the bot to just always check for a 50% profit, we might have missed a smaller profit closer to expiration, and the position might've gone against us and whatever.
So this is an intelligent way of trying to adjust dynamically what premium you're willing to take or what profit you're willing to take as you near expiration. So you could change these and modify these and say, okay, it's not less than 15 days, for me if it's less than ten days. Right? 10 calendar days or whatever it is. So go in there, modify it, change it to fit your kinda type.
Okay, now you don't have a 25% profit. Now you can have the bot check does the position expire in 10 days. Well, we know expires in less than 15, so now we ask it does it expire in less than ten days. And only if it expires in less than ten days, we're gonna check if it has a 15% profit. So do you see how literally we're just stair-stepping this down by day and profit target? We're just literally stair-stepping it down. If I'm 60 days out or anything more than 15 days, look for a 50% profit. 15 days? Look for a 25% profit. If I'm ten days away, look for a 15% profit.
I mean, you can go. Some people do, by the way. Some people do go like really crazy like a couple days at a time, and that's fine. Go bananas. We love it. Now, if you're ten days away, take a 15% profit, and then if you're inside one day, then just close completely. Right? Then you just start doing your close action inside one day.
So this is an example of how you could use monitor automations to adjust your profit targets as you go. To adjust your profit target as you go. By the way, you don't have to use this. You could do a version of this. We're checking to see the total dollar profit. You could have the bot check and see like is the bot profitable by $5, and it's two days from expiration. Yes? Close the position. Don't wait, don't get challenged, etc., close it. I'll keep going, okay?
So I'm gonna save that one. Again, I'll share this one into the community. You guys can do with it whatever you wanna do with it moving forward.
Evaluating assignment risk. Now look, there's a lot of different ways that you can evaluate assignment risk, and I use the term very specifically to evaluate assignment risk, not to exactly determine assignment risk. Because assignment is still random, of course. We have no idea for actually we're gonna get assigned or not. But there are things that are a little bit more leading that would suggest that we are likely closer to getting assigned.
If an option that is short is in the money, it's a higher likelihood that it is assigned than not. Right? So that's one. If the option contract is near expiration and is in the money, it's a higher likelihood that it gets assigned, right? So you guys can see how you can build a case basically against a position being assigned or a high likelihood of it being assigned.
So here's something you could do, and you could put this as different automation. You could put it inside of your existing automations that you're running. Repeat through each short put spread position, like we did, and then we're gonna check and see, and again, make all of your other decisions you want. This is just a hyper-focused example so that we can kinda like show you different ways of using it.
Check and see if the position expires in less than two market days. Now, if the position expires in less than two market days, then what I wanna do is I wanna get through a set of grouped decisions. Now, these are not the only ways you can do it, of course. You can do it a lot of different ways, but here's one example just to kinda get your juices flowing. If a position expires in less than two days meaning expiration is two days away. Then one thing you could do is you could check and see if the positions short leg, again, because in this example, we're using short put spreads. If the short put leg chance of being in the money is greater than 70%.
So if the likelihood, the chance based on probabilities for just two days and the volatility of the underlying security. The probability that it's in the money in the next two days is greater than 70%. That's one. And the position short leg extrinsic value is less than 15 cents. Now that's a cool different way that you could do it, right? When you could say, okay, I wanna check the short put leg and the extrinsic value, right? The time volatility value, not the intrinsic value, just the extrinsic value is less than some amount, say 15 cents. Whatever it is. I'm just using examples here. Again, don't use this exact ones make them fit for you. But let's say it's less than 15 cents, which means that once the extrinsic values start going lower and lower and lower, there's no point to an option fire holding that position as it gets near expiration.
There's a higher likelihood that that contract becomes assigned or exercised because there's no or little extrinsic value, right? If there's a lot of extrinsic value, then there's a pretty good chance that they do not assign or exercise the position that they just simply close out of it by reversing the trade, which has no effect on you. So that's another thing you can do. You could also, if you want to, couple this with and do another decision in here. And you could see if the actual position is trading, the underlying price is trading below your short put strike.
I mean, that would be a good one too to also throw in here because that would suggest that the position is in the money. That the short strike is actually in the money. So you put these all together, and inside two days, all of these would have to be true. And if they were, then you would close the position.
So notice what we're doing here is we're not just arbitrarily going, oh yeah, I'm two days from expiration, close the position. No, no, no, like just because you're two days from expiration does not mean you should always close your position. You should try to do things a little bit, you know, try to use these tools a little bit more intelligently so that you really evaluate whether or not you should close the position.
If you're two days from expiration, but the position is not profitable yet, but it's still far out of the money, and it's not even close. Well, don't close it arbitrarily. You're still in a good position, right? So this is where you can check that. You can check am I really being challenged? Like even though I'm in two days like, have the bot do some checks for you and see if it meets your criteria to actually close.
Now, look, if the position doesn't expire in less than two days and doesn't expire in less than five days, and this is where you can start to stairstep these like how aggressive you wanna close a position. Maybe inside five days, you wanna check and see if the short put leg chance of being in the money is greater than 90%, and the put leg value is less than 5%, and again, we'll add that other additional recipe here to check and see if the underlying price is trading below my short put strike. That's it.
So these are a little bit more like inside five days, it's really gotta be challenging me pretty hard like really hard to where the extrinsic value is basically worthless. The chance of the leg is gonna be in the money is greater than 90%, then if all of those are true, then yeah, I'll close the position inside five days. Again, there's no perfect way to do this. There's probably a million different combinations you could put together in order of sequence and decisions, but next one.
Market volatility-based management. This one is a really fun one. You really only have to look at crude oil to understand lately that low volatility typically begets more low volatility. Like when things are low volatility, they just tend to stay low volatility. We talked about this on podcast. We've done interviews on this with guys. Like when volatility is low, it tends to just stay low. And alternatively, when volatility is high, you tend to get lots of high volatility days clustered together. If you don't know this, go do some research on it. We've done a lot of podcast and put on a lot of research on this too.
When you have high volatility, you tend to have high volatility back to back to back to back. Some of the highest volatility days tend to be followed by some of the second, third, fourth, fifth highest volatility days. So here's what I think about it in this, and just follow me for a second on this. Let's say that you have a low volatility market. Just kinda chugging along low volatility, right? Low volatility whatever. And now, for whatever reason, by the way, crude oil is the magic example of this. There's some catalyst that happens. Go look at a chart of crude oil. You can visually see this.
Then a catalyst happens, and all of a sudden, you get lots of volatility, right? That's what happens. It goes from like a low volatility regime to a high volatility regime. You guys have seen this before. If you haven't, look at a chart of crude oil. That's literally what happened in the last couple of months. What I am saying is use this automation to split your management between the two different regimes. So when the VIX or whatever volatility indicator you wanna use is below 30, low volatility regime, go down this decision path. When volatility is high, go down another decision path.
And what I would think about here is that when there's high volatility, I want to be a little bit more flexible and loose with any stop losses on positions, any tight things like that, because if I have a position that's a huge loser one day and volatility is high, it could swing all the way back the other direction the next day. I mean, it literally could go that fast.
So what I want to probably do just thinking about it during high volatility markets is I probably wanna loosen and remove any stop losses that you have, make sure you're trading to find risk position anyway, right? But loosen and remove any stop losses that you have, right? And be a little bit more patient with things coming into line, like not be so dependent on the volatility of positions.
So here, in this example, I've done the only example here. This is the one that I mentioned earlier, where you don't always have to start with a position loop. Notice you can have multiple position loops inside of your bot. so the first thing I've actually done is I've asked the bot to first determine if the VIX is below 30. Like are we in a high volatility environment or low volatility environment?
If we're in a low volatility environment, then start looping through positions and then go through these sets of decisions. Check and see if the position expires in ten days, check and see if the premium went down 10%. If it expires more than ten days, look for a 50% profit, right? And then you can see I do things like I'm checking to see if the short positions are breached and if they are breached, and I'm inside ten days, I close. Because in a low volatility environment, I'm not likely to get that big move back the other direction.
Now again, you modify these to fit whatever make sense for you. I just want to give you an example. But in a low volatility environment, I'm not likely to get a big swing back the other direction. That can happen, but it's not likely. So if I get breached, maybe I close the position.
Now look over here in the high volatility environment when the VIX is not below 30, a.k.a, the VIX is really high. Now I'm checking for a 25% profit across the board. Right? Or whatever you wanna do. This is just an example, okay? But you check for a 25% profit. You have no stop loss. I'm not exiting if my short strikes get breached because volatility could be really high. They could be breached in the morning, breached in the afternoon, and come all the way back around.
Volatility super high, so all I wanna do is I wanna increase or maybe split the difference in my profit target. I don't care where I am in the timeline. I just wanna take a 25% profit and get out. That's it. The only thing that I would do is just check and see if it expires in one day. So now I'm letting the position go a little bit further into the expiration period, whereas over here, if it's inside ten days and it's breached, then I exit the position. When it's high volatility, I wait, and only I exit when I'm inside one day until expiration.
Literally, it's a different way of like shifting an entire management strategy just based on market dynamics. Whatever it is. You could use technical indicators. You could use the S&P as your like benchmark, like are we in an uptrend or downtrend. You could use whatever you want.
Next example using switches to control bot management. Look, if you haven't checked out switches, switches are awesome. All of switches is a switch. It sounds exactly like what it is. It's just literally a switch. It's a switch that you add to your bot as an input that allows you control parts of your automation by just simply turning on and off the switch. Turn on to do something, turn off to do something else. Right? So that's all it is. It's just literally a switch that you add to your bot, and then you can control it. You can go in and just micro-make controls to your automations.
So down this particular demo, we're again still repeating through some positions. In this case, we have long put spreads. We're checking to see if we have a profit. We're checking to see if it's in expiration. And now, if the position expires in less than one day, we're gonna ask the bot to see if that switch is turned on. The position's been opened at least one day, so we don't wanna avoid any of the pattern day trading stuff.
Now the switch, in this case, is to exit the position if we get a reversal in any of our technicals that we were using. You could use this for any technicals. You could use this for IV. It doesn't matter, like anything that you wanna control with a switch. Like I usually use it for things like, and I'll just give you some examples, close if challenged. I'll put a switch in there that says close the position if it's challenged, and so if I want to close some positions if they're challenged on some bots, I turn it on. If I don't, another bot, so I turn it off. If I wanna close on a reversal of technicals, if I wanna close, if I'm close to expiration, if I wanna close if extrinsic value is too high. You can add it as a switch vs. a hard decision that always has to be yes or no.
When you add it as a decision, then to remove that decision, you have to delete this. You have to delete this decision and remove it. But if it's a switch, you can just turn the switch off temporarily if you wanted to. So, in this case, we have one called allow close if the EMA is reversed. Now all that's doing is just allowing the bot to continue down the yes path. It's actually gonna check and see if the EMAs did actually get reversed. If, in this case, because this was using an EMA bot. If the EMA's signals actually reversed. Yes, they reversed. Close the position. No, they didn't reverse, but I'm checking, don't close the position.
This switch just controls the ability to go down this path. If I turn the switch off, it ends right there, and I don't check the reversal, which means I'm reliant on these other decisions to close my position, which would be okay. That's fine. At some point, it's gonna get inside my expiration threshold. When you add your switches, then in here, this is where it will show up in your settings for your automation. So like this one, for example, which is a high IV rank iron condor bot, we can turn on a switch that says close any bot if it ever gets challenged. That's what the switch does.
So all the decisions after that immediately close the bot if the bot, the iron condor, gets challenged on either strike. And if I just simply wanna turn off that particular way to close the position inside my monitor, I just simply turn it off with the switch. That's it. I turn off that switch, and then I save, and I'm good to go. Now the bot recognizes the new deal and continues moving forward.
All right, two more ones I wanna show you guys. Hopefully, you've had a lot of good ideas. These ones are gonna be a little bit more complex, a little bit more complex, but not too much if you've stuck with this so far.
The first one here is to check challenged legs. So this one is called checking the challenge leg probability. Now, I like this one because what you could do here with this one is you could use it for a combination of different things, okay? You could use it for combination of different things. Using probability decisions, you could use it for exiting positions, right? Around assignment, like we looked at earlier. You could also use it for determining whether or not you wanna hedge something.
Like, think about it like this for a second. If you had a short put spread, and I told you the position was challenged, meaning that the stock was trading under the short strike. Would you always want to hedge that position? And your default answer should be no. Like you would wanna ask yourself questions like am I challenged like immediately? Or am I close to expiration? Am I far from expiration? What does challenge mean? Like, is the stock trading a penny under my short strike? Whereas the stock trading $55 under my short strike? Like, look at Netflix today. That's a different story than pretty much everything else cause Netflix gap is lower, right?
So like, how challenged am I? well, one thing that you could do is you could have your bot determine, again, using the decision recipe for checking a particular legs chance of being in the money. You could use that bot to determine if the chance of one particular leg, like the short put leg's chance of being in the money, is greater than some amount. And then, from there, you could determine do I close the position? Do I leave the position open and open another position? Do I leave the position open, tag the bot as needs adjustments which then triggers another automations to start running?
I mean there's a lot of things that you could do with this, but this, again, is a good way to like check and see if a position is getting challenged by how much and then determine what you wanna do on that, okay? Now, after this one, and again, I just left that in there. It's like a simple one you can kinda mess with and modify in there. What you can do inside of your monitor automation is you can actually trigger the bot to open hedging positions, which was this final one that I wanna kinda walk through here with you.
Now I think this is really cool, and it's not the only way to do it. You can trigger hedging positions by tagging the bot and having the bot look for bot tags. You can use events. There's a lot of different ways you can hedge. This is not the only way to do it, but it is hopefully just one example of how you could do it.
You have the short put spread that you're trading, and you want to check and see if the position's underlying price is below your short put strike, right? That's what you're checking right here. Now again, inside of here, we could also group this with another decision like I don't only want to check and see if the position is challenging me, but I wanna check and see if the position's chance of being in the money is greater than some amount. Okay?
So we can do this. We can go to this position recipe. We can check our short put leg. We can check the chance of being in the money at being greater than, say, I don't know, 80%. So I'm both challenged, and the likelihood that it stays here, in the money, that it ends in the money is greater than 80%. Yeah, for me or somebody, right? Whatever it is for you. You would say that would tell me I need to think and adjust the hedge of this position.
So you immediately tag the position as a challenged put spread, or you don't have to tag it. It's just one way you could do it here. And then you have the bot check and see if it already has a hedge in place. Like is the bot already actively hedging? Does the bot have 0 positions that are short call spreads? Yes, it has no positions that are short call spread. Great, open a short call spread position. That's what you would do, right? So you're trying to open a short call spread which would convert the position to an iron condor, iron butterfly. However you do it, that would try to hedge the existing position that you have.
Now the coolest thing about doing this inside of your monitor automations is you can use a field inside of your open position action. Remember, you don't always have to close positions. You can actually trigger the opening of a position from your monitor, which is the point of this one here. And when you do that, you can match expirations or strikes or amounts or contracts with any existing position that it's going through.
So I've told the bot, in this example, I wanna open a short call spread, which is the goal. I know the symbol that I wanna trade cause it's the same symbol that's being challenged. And now for the expiration, if I wanted to, I can go down here to this recipe, which is called same as position. Now why I think this is so cool is because it matches the same expiration date, so that if you wanted to. You don't have to obviously; you can choose the other ones. But if you wanted to, you could match whatever expiration that current short put spread is in so that you are hedging the same contract series.
So if I'm trading a put spread and it's ten days from expiration, and it's challenged. Well, if I do same as position, and I just connect it to the position it's looping through, it will look to hedge with the ten day to expiration options. If the next position that comes down the line is 45 days, it'll match that 45 days. If the next one is 60, it'll match the 60. It'll stay in the same expiration as the position. That is a really cool feature that really is only available once you're inside of a monitor automation. Because you're opening a position, but you need to reference the existing position, which only really happens inside of a monitor automation. A little bit more advanced for sure, as you guys can see, but very very powerful.
Now, in this case, I can also reference the short put leg of the position, right? Or I can also reference the strikes of an existing position. So if I want to position my new short call spread slightly above my existing short put spread, well, I can go down here, and I can go down to this recipe and reference one of the legs of the existing position. I can do the same strike. I can do a percentage above and below. I can do $1 amount above and below of a strike. And in this case, I said $1 above my short put leg of that position.
So now I'm using the bot to open and trigger a new call option, but it's $1 above the short call strike. If you have a short put leg that you open at 100, hopefully, you guys can see this as I'm drawing. And your short put spread was opened as a 100 short put and a 95 long put, right? That's what you did. Then what it would do is it would open a call option with a short call leg $1 above your short put leg, which is the one I want. Right? That's what you could do. You could trigger it. So that short call leg is triggering off of the short put leg that you have in the existing position. So the short call leg is looking at $1 short put leg above the position. That's what it's looking for.
The last thing that you can do here is you can, I mean, you can obviously key off of that existing position a number of different ways. But the last one here, and I think this one is really powerful too, is you can match the number of contracts that you have, which to me, I think this is pretty powerful because if you have one position, that's five contracts, you don't always wanna hedge with ten or twenty or forty or fifty contracts, right? You wanna probably do like one for one hedge in the number of contracts that you have.
So, in this case, you can go here to the amount. You can do the same quantity as the existing position. So this means that it'll match it contract for contract, right? If the bot has capital to do this. So it'll match it contract for contract, which means that if one spread that you're trading is five contracts. It needs to be hedged; it'll do five contracts. If one spread that you're trading is ten contracts or nine, it will do nine contracts for those different spreads that you're trading. Maybe those different ticker symbols that you're trading. And I think that is wicked, wicked smart that you can do that inside of your bot without having a mess with it or manage it or do anything like that. Right? It's just a really cool way that you can manage your positions.
I think I went through all of these on the list, but there's one other one that I wanna show you guys here. Cause I think it's a really cool way to do it. Kudos to Randy for throwing this out there to the community, but there's a bot template that he put out there that was basically for making adjustments or scaling in with tranches. So there's a template in there. I think it's called open with tranches. I just renamed it so I could find it here on the demo here.
But in this case, what you're doing is you're entering positions. This is why I want to end this one as an idea because you're entering positions in a tranched or grouped format, right? So you know you wanna do, say, ten iron condors or you could to them instead of two or three or five or whatever you want, but you deliberately enter them at the same time with different orders, so that you can basically group them into different tranches. That's essentially what you're trying to do.
And when you do this, you can also tag them. And so, this is, again, a little bit more advanced, but let's say you're going through this thing, and you have all of these scanners that you're getting into and eventually get down to the point where you wanna open a position. Now, notice what he did in this template is he stacked open position actions right behind each other. Now that wasn't because he just want to get into this massive position. He could've done that with one open position action. But instead, what he wanted to do is he wanted to open different tranches.
So, in this case, he open the first one, just send the order and then send the next order, then send the next order. The first order was sent, and it had a tag tranche no. 1. So this is like group no. 1 that has gone in, right? This is first wave of whatever inventory-like line. Then the next one was sent in, and it was sent in tranche no. 2. So this is the second group. Again, all sent in the same time, but just for tracking purposes, he's tracking this group as tranche no. 2. It could be ten symbol, or it could be ten contracts, twenty contracts, whatever you want. And then, the third way was using tranche no. 3.
So if you guys see this now, you can see that we have three open position actions. All going through with the same time, but in this case, what it's doing is it's literally going through, and it's splitting that up into three different orders, just for accounting bookkeeping purposes to go into different tranches.
Now the reason I showed you that in the scanner is because you have to understand how it's working in the scanner to then get back to the actual monitor automation, okay? Now in the monitor automation, he's still looping through every position, and this time, he's doing his normal checks. Does the position expire in ten days? If it does, close it, right? But now what he's doing is he's going through, and he's saying, okay, which positions are tranche number one? If they're tranche number one, check these profit and loss return percentages and close those position, respectively.
So, for example, if you had, and I'll just annotate this screen again. If tranche number one was trading, let's say, five contracts. So if tranche number one was trading five contracts and, I don't know why this is like a terrible one, but that's number one. And tranche number two here, let's say it was trading ten contracts cause you could do different ones. If these five contracts hit a profit target, it would only close these five contracts. Tranche number one. If later tranche number two has profit target, it will close these ten contracts. And it will basically like leg out of the position if you wanted to.
The way that I would use these is I use this automation to rebuild some of the automation I have is I would do this. And I would do this is a low-profit target. Maybe this is like a 10% profit. Then I would make this a 25% profit, or something like that, and then this is a 50% profit, right? And group one, I would just be looking to take 10% off. Then group two, I'd want to do 20-25%, and finally group three, I'd wait for 50%. But I want to try to get something off fast.
You could do something like that where you manage positions in different groups, and you can see as you just continue to manage positions in different groups, obviously, that you just continue to go down that path of going tranche one, tranche two, etc., etc. and just managing all the positions respectively. I think it's a really cool, very unique way of doing this that I really haven't seen a lot of people do.
I hope you guys had a really awesome time today. Thank you so much for spending an hour with us. We really appreciate it. As always, we don't take it lightly. I hope we jam-packed your brain, and I hope your brain hurts with ideas and different ways, so you could use automated trade management. As always, go in there. Go to the community. Go to templates. Download, explore what other people are doing. I do this all the time, like go in the morning, grab a cup of coffee, or whatever. Go explore templates and just see what other people are doing.
There are wicked smart traders in the community doing insane things. Some things I can't even zoom far enough out to see the entire automation built out cause they've got so much logic built it. It's actually mind-blowing. So go explore the community. There's a wealth of information here. I hope this was just a spark to some creativity and some ideas that you could do with trade management. And then again, please share these back to us in the community.
I'll start a community thread tonight on all these different templates and get them up there, so you guys have a copy of these. And then you can share some back. So have your ideas, go share some ideas back to us. Keep the same thread going. Hope it was helpful. Have a great rest of your Wednesday. Until next time, happy trading.