Trade entry & Put-sell questions

  1. Are there detailed instructions anywhere for the Trade Entry page? In particular, the FAQs explain that a "stop loss" is a Stop order used to close losses. But, does not explain–does it make any difference whether I use the "Stop" or the "Stop Loss" entry form to activate a stop-loss order?

    2. With Naked Put-sells, some client accounts might experience "early exercise" while others do not. Can Gen3 recognize that positions result from early exercise–and automatically close those positions with STC market orders? If not, how does Gen3 resolve this problem?

    4. Re Put-sell compatible brokers

    Am I correct that MB Trading can NOT be used for Put-sells? (It says "no naked selling" for MB Trading–but a put-write is sometimes called "naked" and sometimes called "cash-covered.")

    If so, it seems the ONLY brokers for put-selling are AGM, Experia, TradeMonster, InteractiveBrokers. (And InteractiveBrokers does not accept Gen3 for stock trades for US clients, so I assume not very feasible.) Is this correct?

    5. Limit orders with Options. As I change a Limit order on a wide-spread Option position–some subscribers might get filled while others do not. So I assume that I should just keep improving the Limit order until it is certain to get filled by all subscribers?

    But if so, will Gen3 recognize that this does not pertain to already-filled orders, or perhaps mistake the new Limit price for a new order? How is this resolved?

After Googling these C2 forums, it seems the ONLY actual brokers for Gen3 put-selling are TradeMonster and InteractiveBrokers. InteractiveBrokers has lower fees but is not licensed for Gen3 for ETF trades for US residents.

Also, I am not clear about this, but it seems that Experia and AGM are only intermediaries for InteracitveBrokers. To use InteractiveBrokers for Gen3 we must sign up with these brokers charging much higher fees.

Also, TradeMonster Options fees are $.50 per contract with $12.50 min. My Put-sell system usually budgets about $10,000 liability per ETF for a $100,000 account. This usually amounts to 2 contracts. So, that’s $6.25 per contract for a $100,000 account or $12.50 per contract for a $50,000 account.

At this rate, I would have to recommend a minimum account size of $100,000. Kind of discouraging.

InteractiveBrokers itself usually charges $1.50 and TradeKing $6.25 for 2 contracts for a $10,000 account.

  1. How to determine "cash" or "net liquidation value"? The Trade Entry page seems to have no listing for these essential figures? This makes it difficult to avoid margin usage while still utilizing full account value.

One question answered: I suppose the performance graph supplies "net liquidation value."

Other questions not answered.

Let me answer a couple of your questions now, and redirect you to brokers for a few others.

1) If an individual trading account is exercised on an option position, C2 will not know about it. Instead, the option position that C2 thinks the trader should have will be missing from the account, and a stock position will appear in its place. C2 AutoSync will re-synchronize the account to reopen the option position if possible, and liquidate the stock position.

This very rarely happens, since most C2 System Developers do not trade in-the-money options, and out-of-the-money positions are very rarely exercised/assigned.

2) When any limit order is hit, in any autotrading account, C2 treats the order as filled in the C2 Model Account. Which means that all followers of teh system will fill at market if they were not the lucky few to receive the limit fill. Of course this only occurs when the limit price is non-market-clearing. Market-clearing limit prices by definition fill in all autotrader accounts.

3) I think the permissions to sell uncovered option positions varies both by broker, and by the account-holder in question. So you pretty much need to go out to the broker in question and negotiate/request this permission. In my limited personal experience with this, brokers are more accommodating with people who have larger accounts and who trade more frequently, but this is just supposition; I could be wrong.

In any case, when we know for certain that a broker absolutely does not allow naked option writing (e.g. Mb Trading) we’ve put it on our FAQ to avoid customer hassle and heartache. But other than those explicit cases, you should probably reach out to the brokers you are considering using and ask them whether they will enable your account for the type of trading you envision doing.

Thank you for the succinct replies, Mr. Klein.

In consequence, I understand as follows. (Please correct me if I am mistaken.)

1) I.e. Gen3 will see the holdings resulting from early exercise as "not belonging" and will liquidate them immediately. Very good. (It is also nice if Gen3 succeeds in re-opening the short-Put but if not, this is not a big deal. By the way, optimal Put-selling is near-ATM and will experience exercises routinely and it is not feasible to reposition to avoid this with the level of fees available.)

2) I.e. there is no such thing as a Limit order with autotrading, except as a trigger-point for a market order. Wide-spread low-volume Options trading is not feasible, the client accounts will be burned.

3) I.e. the only broker that can be relied on to offer Gen3 Put-selling for both US and non-US clients is Trade Monster. And Trade Monster inexplicably charges $12.50 min for 1-10,000 contracts monthly and $3.50 min for 10,000+. I.e. either double the going rate or half the going rate with no in-between.

In summary, during sideways markets, a touch of judicious put-selling would not add significant risk while it would turbocharge the gains of my system, "SN-SOS High Security ETF Investing." However, Put-selling does add Margin usage which is automatically assumed to be a risk parameter. Also, the results would only be relevant to Trade Monster clients.

C2 systems tend to be very high-risk, and necessarily so to justify the $780 annual platform fee. My SN-SOS system is uniquely designed as a relative safe-haven, thus enabling C2 clients to use C2 both for high-risk and medium-risk allocations, thus dilute the platform fees while also diluting the risk. Put-selling would substantially increase the gains of my high-security system–but not enough to compete for clients attracted to high-roller systems. Meanwhile, Put-selling would dilute the high-security appeal of SN-SOS (which otherwise uses no Margin)–and also limit SN-SOS to Trade Monster clients.

Also, one thing I like about C2 is that conservative investors with large portfolios (who are not interested in the usual high-roller autotrade system but who are interested in the security of holding their own assets vs. entrusting mutual funds) can use SN-SOS at C2 and also diversify between multiple reputable online brokers–if I do not incorporate Put-selling.

In conclusion, I might later add a more aggressive system that specializes in selling Puts and Calls at Trade Monster. However, there will be no Put-selling and no margin usage for my flagship system: [LINKSYSTEM_86317396]