How to use Options Trading Strategy in Algo Trading?


What Is Options Trading? (First Things First)

Options trading is different from regular stock buying and selling. It works in a different method. Has it’s own benefits over regular stock trading. Options trading and strategy building can help a trader Go a long way toward profits If executed well.

Let’s say you want to purchase 100 units of shares of Tata motors. One unit is priced at 1000 Rupees, so that will be (1000 x 100 =) 1 Lakh rupees of Investment. The majority of normal traders might not have such High funds available to Invest.

That’s where the options trading and Options trading app jumps in. You can simply pay a token amount, some 2% or so, and Become the owner of those 100 Units tata motors shares with the Options contract.

How Does Options Trading Work? 

See options trading is basically a contract, between a buyer & a Seller. After paying the token amount (2-3% as discussed above) you have entered the Options contract with a seller.

Now, this Options contract has 3 Important terms you should be aware of :

1) Contract Expiry Date :

Options contracts have a fixed time duration. Usually, they are 1 month long. The decided rates and everything else stay applicable until the contract expiry date.

2) Strike Price :

It is the minimum price the stock under consideration should reach to exercise the Options contract.

If you entered a contract with a share price of 1,000 & You are expecting it to reach at least 1,200 - so you can make some profit by selling.

So this 1,200 is your strike price. Basically, it is The minimum price for which you would exercise or Execute your contract.

3) Expiry Price :

It is simply nothing but the price of the underlyinasset of the Options contract on the last day of Contract validity.

If your options contract is expiring on 31 May, then the Price of the stock on 31st May, which you are trying to buy/sell through the options contract is Called expiry price.


Visit SpeedBot Marketplace to checkout Options Strategies.

Read More: Human Traders Vs Trading Bots: Which Is Better?

5 Steps Option trading process by using Algo Trading:

Step 1: Research & Selecting Right Asset →

If you have decided to enter options trading for the stocks of ‘Infosys’, it should have solid logical backing. It is a very crucial element of Options trading and strategy building.

Don’t just go with gut feeling or rumours or Just because your friends say so. You should do a proper technical analysis of any asset before entering the Options contract.

Whether it is stocks or any other asset, a Deep analysis is always recommended by experts. You also don’t need to have knowledge of complex tools and technicalities for that.

One of the Best Algo trading app in the market would do all the Detailed analysis, with just a few clicks. So invest some time in research before moving forward. It will be worth it.

Step 2: Choose The Best Algo Trading Platform →

Selection of the best platform is really important. There are multiple platforms available in the market. Some are much easier & user-friendly while the majority of them could be complex to use.

One of the fastest-growing algo trading app in India, Speedbot - is recommended great choice. The app is user-friendly and very simple to get started and get used to with it.

The selection of the platform also depends on the trading options available on it. So give a proper check to that as well. Another emerging trend you should consider is ‘Bot Marketplace’.

Algo trading app with bot marketplace can do wonders for Traders. Takes away 90% of your complexity. So you can focus purely on decision making Options trading and strategy building.

Step 3: Build Options Trading Strategy → 

No matter if you are a small budget investor or a Big bull. Having a strategy is as important as an engine is to a car.

Everything else is built around this trading strategy. Decide the fund you can afford to & want to Invest in for a specific period of time. Think over how you can diversify your trading investments in the best possible manner.

After entering a Trade, how much profit are you expecting based on your analysis & Research is very important. It will help you close your position and Exit at the best times.

Also how much Loss are you ready to bare just in case things change beyond your Vision. This will help you stay in the market for a Longer run & Sometimes not exiting the market at a Small crash point can actually Enjoy wholesome profits.

Step 4: Backtesting Trading Strategy  → 

Backtesting your strategy will help you find out any mistakes or Loose ends you might have left. It also guides out points that you might not have considered while building the strategy, but adding them could Increase your chances for Better results.

How To Do Backtestesing, You Wonder?

100% Detailed and In-depth backtesting is provided in One of the best Algo trading apps in India. You can deploy all your strategy & within minutes you get a detailed overview.

Fix those Loose patches pointed out by the Algo trading app and Increase the efficacy of your Strategy.

Step 5: Revamp, Modify & Deploy   →

By following all 4 Previous steps correctly, you are now in the Best shape possible to enter the Trading market. As you spend more time in the market, you will obviously improve by some percentage. But all these exercises will help you kickstart the proceedings properly.

While getting started with Options trading, the Bot marketplace is One Go-to option that experts are mulling these days. The latest tech-powered trading bots provided by the Algo trading app are Highly likely to boost the Results.

How to use Options Trading Strategy in Algo Trading?
SpeedBot Team 13 June, 2022
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