Looking for a spreadsheet for money management or software. Goals to figure out position size on the go and manage risk, say 2% of the account. Risk/reward calculations. I never used money management on stocks - although I can see myself creating the spreadsheet for stocks myself. Well, learning eventually…. However for options it becomes too much (multidimensional) for my excel skills… willing to learn though. Any guidance would be greatly appreciated.
I suspect that it probably does not exist. If you have enough positions such that you need software to manage them, then how would the software get your position data? IB is the only broker that I know of which has an API extensive enough to allow you to pull all your positions, avg cost, cost basis, historical data, etc. I ended up making my own software to manage my option positions and it uses the IB API to pull all that data.
You already have your losses capped to the cost of the premium on a worst case scenario. All you need is to manage your losses and keep it small. If you have a trading edge, you will make monies. I use only Excel to manage my trades and figure out my average gains vs average losses, expectation which must be positive.
The money management portion on stocks is easy.. Percent of capital to risk/ATR or some other volatility measure you like.... The trickier part is the option component... If your MM algo says you can trade 200 shares of stock,are you going to buy 2 options,or buy the Delta equivalant number of options,or the same dollar amount of options equal to Percent of capital to risk... And then there is the issue of stopping yourself out( or not )on the options.. And have you run any simulations on trading options vs the underlying??
Possibly best to learn/use a good options platform (e.g. ibrk or Tos) as they have a built in models for assessing/managing the all major P&L risk aspects of an active semi-large options portfolio (delta (including beta weighted)/theta/vega/notional size,leverage etc).
thanks. I don’t know much about ATR and it’s relationships to option - homework… what are your favorite options strategies to trade? How do you manage risk, do you have stops in place? Is TOS a great options platform?
Hi,you need to read up on volatility based position sizing. You can easily get by on fixed % stops,but you should be aware of Volatilty adjustments.. I make 98% of my money from market making,but it revolves around Flys,verts and ratios... If I tool risk,I would ALWAYS trade with a stop.With that said I NEVER let a bad leg get away from me. I am rarely net short options in size,unless I want to own the underlying..With that said,I am short SPX upside vol TOS is great,but its not money managemenet software...