The Perfect Way to Test Your Options Trading Strategies

One reason options trading is great? Because of its flexibility. Investors can be bullish, bearish or neutral. They can play for volatility or lack thereof, and can use options to protect, enhance or repair their portfolio. But there isn’t a great way to test your options trading strategies before going live with them.

Sure, traders can use paper trading accounts, but that’s not always the best solution. It can be great for full-time investors who are sifting through charts 40 or more hours per week. But they don’t work well for traders who have other business or day jobs to attend to. Further, not all full-time traders have time to cater to paper trading one of their new emerging strategies.

But thanks to Option Party, they can now use an entirely new feature called Portfolio Manager. Users can apply various entry and exit rules, portfolio management criteria and choose which screeners they want to test.

So how does it work? First, let’s track.

Using the Tracking Strategy

Set your screening criteria just like normal. Once you scan the market and find your top trade results, you will now notice a new button that says “Track.” By selecting “Track” on the results page, users will then get a prompt that explains what’s going on where you can find the tracking for your new trade.

Image No. 1

Pretty neat, huh?

Here’s a Perfect Way to Test Your Options Trading Strategies

Image No. 2

By selecting the “Track” button, we’re taking that specific trade from our screening strategy and adding it to our portfolio. What’s this? We’ve been working on the portfolio concept for quite some time here at Option Party and we’re finally ready to introduce it to our users. This is step one. 

The prompt from above will take you to a page that looks like this:

Here’s a Perfect Way to Test Your Options Trading Strategies

Image No. 3

From here, you’ll notice a completely different layout. Going forward, anytime you want to “Track” a particular trade from the screening page, just simply hit the button and come find it on the new Portfolio page. 

There’s no limit to how many trades we can track, as they will simply continue to be added to the “Scan Results Portfolio.” To see how they’re performing, simply click on “Positions” while looking at the Portfolio Manager screen (shown above in Image No. 3 via the red arrow). That will bring you to a page like the one shown below.

using portfolio manager

Image No. 4

By clicking on the trade title — in this case, “LCol in NVDA expiring 11/16/2018” — it will bring up further details on the trade. It will show the entry price, number of options involved and the total trade value.

Other Portfolio Manager Options

Option Party users can do more than track the positions they’re interested in. In fact, they can create more complex and personalized situations using Portfolio Manager as well. Clicking on “Create Portfolio” will allow users to create their own portfolio with their own criteria. This is shown by the blue arrow in Image No. 2.

Specifically, they can set up how much money is in the portfolio, how much cash to set aside that’s not to be used for trading (that’s the “Cash Reserve” option) and even what type of pricing to use on the trades. That is, using market orders or using the midpoint of the big/ask.

Just like the screeners function, users can create as many or as few portfolios as they desire. From there, go back to the “Positions” page and select the “Create Position” options on the far right. This is highlighted by the dashed blue box on the right hand side in Image No. 4.

This will bring up a bevy of options, allowing the trader to be as broad or as specific as they’d like. Once we name the trade and select which screener we’d like to use, traders will have to determine how big they’d like the trade to be. If they’d like, they can also use a minimum trade amount too. Meaning that, if the trade size is $1,000 and we enter a minimum trade amount of 75%, then the trade will have be put on with a minimum size of $750, with an attempt to fill all the way to $1,000.

Entering and Exiting a Position

Creating a new position will also allow traders to choose from various entry and exit strategies. This ranges from entering at the earliest time possible, to selecting date, time and even earnings-specific options. When it comes to exiting the trade, users also have plenty of options. This ranges from a standard exit situation — either a percentage or dollar gain or loss — as well as more complex situations. Such as when the probability of profit falls below a certain mark, and/or allowing the position to be dependent on delta, implied volatility or simply how close it is to expiration. Best of all, these exit selections can be combined as well.

Lastly, realize that once a trade is entered and then exited, the entry rules for the next trade on the same strategy will trigger once again. Meaning that, say we tell Portfolio Manager to enter the best trade from our “Bull Call Spreads” screener. As soon as that entered trade triggers its exit, the portfolio will automatically begin looking for its next trade under this strategy.

This can be stopped though, if investors wish to pause it. Simple go to the “Edit Positions” button on the portfolio page, shown below in Image No. 5 with the red arrow.

 

Image No. 5

Toggle the entry rules to “Entry Disabled” and the strategy will not be deleted, but it will not be active again until the user toggles the entry back to an active position. These “idle” trade strategies can be found under “Empty Positions” on the “Positions” page.