Lets say your risk settings are set as followed:
- 50 trades in 5 days
- Max Option Premium of $1.50
- Max Total Trade Price of $200
- Allowable Slippage at 2%
Example Scenario One: #
In this example a trader executed a trade for a BTO on Aug 13 $BA 235 Calls @ 1.84 x1
Based on the trade entered above, and taking into consideration our example risk settings, the option premium (1.84) is higher than your max option premium (1.50), which ultimately would result in a skip for this trade.
Example Scenario Two: #
In this example a trader executed a BTO for Aug 25 $SPCE 25 Calls @ 0.65 x1
Based on the trade entered above, and again taking into consideration our example risk settings, the option premium (0.65) is below your max option premium (1.50), which would instead result in a successful execution for your account.
Example Scenario Three: #
In this last example a trader executed a BTO for Jul 30 $AAPL 144 Calls @ 1.17 x2
Based on the trade entered above, and taking into consideration our example risk settings, the option premium (1.17) is below your max option premium (1.50), the max trade price (2.34) is higher than yours (2.00). Although your max trade price is higher by $34, that’s at 2x contracts, which means 1x would be acceptable. Ultimately, unless it was only 1x contract deep, this trade would execute, just at a lower number of contracts than the trader executed in order to conform to your risk settings.
Basically, if the trade executed by the trader is either:
- under your max premium and max total trade price
- under your max premium, but over max trade price due to multiple contracts, effectively allowing the program to scale down the number of contracts entered to be under your max trade price
Then your trade WILL be executed.
Now on the other hand, if the trade executed by the trade is either:
- both above your max option premium and your max trade price
- under your max trade price but above your max option premium
- max trades surpassed max trades in x amount of days
Then your trade WILL NOT be executed.
