Conditional Order conundrum

[TheBOT]

I'm new(ish) to TWS and wanted to know how to place Conditional Orders for Put Credit Spreads such that if the underlying fell to a certain price level it would trigger a Buy order. I asked IB and a guy named Larry sent me a brief, but detailed example. I was able to follow it no problem and create the Conditional Order. Thanks, Larry!

I asked a user on this forum for advice about setting a Stop Loss (as part of a Bracket Order) based on the premium going down in value by a certain percentage (i.e. cut my losses if the value of the contract dropped by 10%+). He advised me not to base it on percentage because the Stop Loss could get triggered prematurely if the Bid/Ask spread were to widen. Instead, he suggested I configured it based on the price of the stock dropping below a Support Level, for example; fair enough. So, I did some research and I found an article that explains how to create a condition that does just that.

However, that poses a problem... how can I create a condition using the 'Price' variable to trigger a Buy order but also use the same 'Price' variable to create a condition trigger a Stop Loss order? How can I have 2 conditions as part of the same order that appear to serve the same purpose but are designed for 2 totally different reasons? I hope that makes sense. I don't think there's any way for TWS to distinguish between them.

I've included two screenshots. One shows a hypothetical condition (that I created) to buy AAPL if the price drops to or below $187. The second condition (created by the author of the article) instructs TWS to trigger a STC order if the price of TSLA drops below $202.12.

I can't create the Stop Loss condition as part of a Bracket Order because their Profit Taker and Stop Loss values are based on the dollar value of the premium, not the price of the stock. So, how do I overcome this problem?

 

[smallfil]

I'm new(ish) to TWS and wanted to know how to place Conditional Orders for Put Credit Spreads such that if the underlying fell to a certain price level it would trigger a Buy order. I asked IB and a guy named Larry sent me a brief, but detailed example. I was able to follow it no problem and create the Conditional Order. Thanks, Larry!

I asked a user on this forum for advice about setting a Stop Loss (as part of a Bracket Order) based on the premium going down in value by a certain percentage (i.e. cut my losses if the value of the contract dropped by 10%+). He advised me not to base it on percentage because the Stop Loss could get triggered prematurely if the Bid/Ask spread were to widen. Instead, he suggested I configured it based on the price of the stock dropping below a Support Level, for example; fair enough. So, I did some research and I found an article that explains how to create a condition that does just that.

However, that poses a problem... how can I create a condition using the 'Price' variable to trigger a Buy order but also use the same 'Price' variable to create a condition trigger a Stop Loss order? How can I have 2 conditions as part of the same order that appear to serve the same purpose but are designed for 2 totally different reasons? I hope that makes sense. I don't think there's any way for TWS to distinguish between them.

I've included two screenshots. One shows a hypothetical condition (that I created) to buy AAPL if the price drops to or below $187. The second condition (created by the author of the article) instructs TWS to trigger a STC order if the price of TSLA drops below $202.12.

I can't create the Stop Loss condition as part of a Bracket Order because their Profit Taker and Stop Loss values are based on the dollar value of the premium, not the price of the stock. So, how do I overcome this problem?

For trading purposes using stop losses in trading stock options is impractical. The reason I say so, is the market makers who are buyers and sellers of the same options you have, will move the bid and ask spreads as wide as possible. Chances are good, your stop losses are triggered and if it is a market order, gets sold at severely disadvantageous options prices to your detriment.

 

[TheBOT]

OK. Well, if it's not advisable to specify a percentage for the Stop Loss as part of the Bracket Order what can I do?

 

[HobbyTrading]

However, that poses a problem... how can I create a condition using the 'Price' variable to trigger a Buy order but also use the same 'Price' variable to create a condition trigger a Stop Loss order? How can I have 2 conditions as part of the same order that appear to serve the same purpose but are designed for 2 totally different reasons? I hope that makes sense. I don't think there's any way for TWS to distinguish between them.

You were advised in your other thread that IB/TWS does not consider this to be one order. To them each of these are independent orders.

 

[smallfil]

OK. Well, if it's not advisable to specify a percentage for the Stop Loss as part of the Bracket Order what can I do?

Using stop losses are impractical because the market makers will move the bid and ask spread as wide as the Grand Canyon. You can have a mental stop loss but, you would end up baby sitting your order every single day to see if your mental stop loss gets hit. Then, you have to exit the trade manually if your stop loss is hit. Too much waste of time, for little gain if at all.

 

[TheBOT]

So, when it comes to vertical spreads you don't recommend using Stop Losses of any kind? No, disrespect, but that seems counterintuitive (and dangerous). I mean, every time I watch a trade video the narrator always stresses the importance of protecting oneself to the downside using a Stop Loss. For those that can't (or don't want to) babysit their trades there must be something they can (and should) do to automate exiting a losing trade(?)

 

[Bodrey]

Using stop losses are impractical because the market makers will move the bid and ask spread as wide as the Grand Canyon. You can have a mental stop loss but, you would end up baby sitting your order every single day to see if your mental stop loss gets hit. Then, you have to exit the trade manually if your stop loss is hit. Too much waste of time, for little gain if at all.

Hi Smalfil,

OK - I finally figured out how to use Conditional Orders instead of Stop Losses to close losing trades. Man, TWS is not an easy trading platform for the uninitiated. So, for those that are still trying to figure it out this is how you do it:

NOTE: Your trade order must be submitted to market and filled BEFORE you can create any conditional orders for it.

- Right-click on the order under the Portfolio tab > Trade > Order Ticket
- Click on the 'Sell' radio button and specify your Order Type and Limit Price
- Change the 'Time in Force' drop-down setting to GTC
- Switch to the Conditional tab and click the Add button
- Choose 'Price', enter the underlying's ticker, and change the Operator symbol to '<='
- Enter the underlying's price at which you want the Sell order to be triggered
- Click the checkbox if you want the Sell order to be triggered outside RTH
- Click the 'Transmit' button and it's done!