In today’s dynamic market environment, using the right trading strategies and tools can make all the difference. The AlgoTest Strategy Builder allows traders to create complex options strategies efficiently with just a few clicks. Whether you’re looking to place multiple orders together or manage your risk effectively, the Strategy Builder simplifies the entire process.
Watch the full video demonstration at the top of this page to follow along and see the Strategy Builder in action as we build a monthly short Iron Condor. The video will guide you step-by-step through the process for a more hands-on understanding.
Building a Monthly Short Iron Condor
A common options strategy traders use is the Iron Condor, which profits from low volatility and a narrow trading range. In this blog, we’ll be demonstrating how to create a monthly short Iron Condor using AlgoTest’s Strategy Builder.
Be sure to watch the video demonstration above for a detailed walkthrough of setting up this strategy in real-time on the AlgoTest platform.
1. Start with a Short Strangle
To begin, select the 30 Delta strangle. Avoiding the 50 strikes on monthly options is crucial, as they tend to be illiquid, unlike weekly options. For this strategy, select the 31 Delta put and the 30 Delta call. Once the strangle is set, check if the combined delta of both legs is close to zero. This ensures the trade is delta-neutral.
For a more visual explanation of how to set the short strangle, refer to the video demo where we build the 30 Delta strangle step-by-step using the AlgoTest Strategy Builder.
2. Finding the Wings
AlgoTest’s Strategy Builder offers a powerful feature that automatically finds wings based on your acceptable maximum loss. By clicking the “Limit” button, the platform pre-populates a value for the maximum acceptable loss on expiry, typically with a 2:1 risk-reward ratio. This streamlines the process of setting up a risk-defined strategy like the Iron Condor.
In the video, you’ll see how the tool helps find the wings at 27,550 and 24,250, setting a max loss of ₹23,000 and a max profit of ₹8,000. Watch the video tutorial for a real-time view of how this feature works and how to adjust the risk and reward for your strategy.
3. Connecting Your Broker and Executing the Trade
AlgoTest integrates with 30+ brokers, making it easy to execute trades directly from the platform. For this example, we’re using IFL as the connected broker. Once logged in, name the strategy and confirm the basket of trades. The Strategy Builder will show all four legs with their bid-ask spreads, allowing you to adjust your order prices.
For further clarity, watch the video to see how to connect your broker, adjust order prices, and place the trades seamlessly using the basket order functionality.
4. Placing Orders with a Single Click
AlgoTest’s basket order functionality allows you to place multiple legs of a strategy simultaneously with a single click. In this case, placing all four orders at once with limit orders ensures better control over trade execution. If the market price changes while the order is open, you can modify your trades directly in the platform, ensuring flexibility during execution.
In the video demonstration, you can observe how all four orders are placed at once, how orders can be modified as market prices fluctuate, and how efficient the process becomes with just a single click. Be sure to watch for a real-time demonstration.
5. Efficient Order Management
A unique feature of AlgoTest is that buy orders are placed before sell orders. This ensures that the brokerage’s risk management system (RMS) doesn’t flag the order for insufficient margin, preventing unnecessary delays or rejected trades.
Watch the video to see how this feature works in real-time, ensuring smooth execution without margin-related issues.
Important Disclaimer
This strategy is for demonstration purposes only and is not intended as financial advice or a recommendation. The goal of this demonstration is to showcase the features of AlgoTest’s futures and options backtesting platform and live/paper deployment services. Always conduct thorough backtesting, research, and due diligence before investing or trading in the stock market.
Options are leveraged financial instruments and can lead to significant financial loss if traded without the necessary knowledge or experience. AlgoTest is not responsible for any profits or losses resulting from the use of its platform.
Past performance is not a guarantee of future results. For more information, visit algotest.in.
Conclusion
Using AlgoTest’s Strategy Builder, you can easily create and execute complex options strategies like the monthly Iron Condor with minimal effort. The ability to place multiple orders at once, find wings automatically, and manage risk effectively makes it an essential tool for traders.
By streamlining the process, AlgoTest ensures that even sophisticated strategies can be executed efficiently, saving traders time and improving overall trade accuracy.
For a complete walkthrough and visual guidance, don’t forget to watch the full video demonstration embedded at the top of this page. It will give you a clear understanding of how to implement these steps effectively.
