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breaking news Can you automate options trading? • Benzinga

Options trading can generate great returns, but it is also time consuming. Many traders monitor their screens throughout the day to track stock price fluctuations. Stock trading has its own volatility, but derivatives like options have even more volatility, making it harder to walk away from your screen. Automated options trading would give you more time and handle options trades for you, but is it a good choice for strong returns? Find out how automated options trading can complement your portfolio.

Can you automate options trading

It is possible to automate options trading. You won’t have to buy or watch positions to find the right sell price. Artificial intelligence (AI) software can buy options and sell them in your portfolio on your behalf.

How does automated options trading work?

Automated options trading software does the trading for you. The software asks traders to fill in parameters that determine when the automated options trading AI buys and sells positions. You can instruct the AI ​​to buy or sell options based on technical analysis indicators, expiration dates, strike prices, and other factors. Many traders set maximum losses to limit their downside on each trade and maximum gains so that they get a win instead of losing their winnings because they waited too long.

5 Benefits of Automated Options Trading

Automated options trading has several advantages for traders. Here are some of the benefits of an options AI tool.

Trade less emotional

Investors should approach the stock market with logic, but emotions almost always prevail. Emotional trading can lead to bad decisions that increase your losses. You can panic by selling an option only to have it double in value the next day. You may also see an option expire worthless. These actions can incite revenge trading and other emotional tendencies that can quickly hurt your portfolio. Automated options trading removes the emotional element from trading. You provide parameters to the AI ​​and then the auto trading software takes care of the rest.

Trades are executed efficiently

Are you spending time with your family and don’t feel like taking out your smartphone to trade options? No problem. Automated options trading software can perform the trades for you and increase the likelihood that your trade will be successful. The AI ​​knows to bid in the middle instead of pricing too low for a buy or too high for a sell. The AI ​​can react quickly if an options trade is not executed the first time.

Diversified investment strategy

A diversified investment strategy lowers your risk and gives you access to more opportunities. Options trading software can buy and sell stocks that meet your technical analysis parameters and other details. You won’t have to worry about researching hundreds of stocks and keeping up with the news when automated options trading takes care of that for you. You can spread your options trading portfolio over 10 to 20 different positions instead of one to three positions depending on when and what you know about the underlying stocks. It is easier to recover if one of your 10 option trades turns into a loss than if one of your three positions turns into a loss.

You also don’t have to stop buying calls and puts. Options trading software allows you to use multiple options trading strategies. Some of these strategies do not carry as much risk.


Your investment criteria may seem good, but you’ll never know until you put your strategy to the test. But you don’t have to wait to test your settings. Backtesting allows you to see how well your options trading rules would have worked in the past. You can see if your current rules would have generated a positive return in 2021 and prior years.

Backtesting is a simulation that allows you to see how your auto trading ideas would have worked in the past before using them in the current market. This feature gives you the reassurance you need to start trading with an options AI or can serve as a warning that you might need a different approach.

Reduced transaction costs

Automated options trading software can help you reduce trading costs. Unlike stock trading, which is free on most platforms, most brokerage firms require you to pay an additional fee for each options contract. A single fee won’t make or break your portfolio, but an active options trader can end up paying hundreds of dollars over the course of a year. AI options trading can lower your costs with a flat $5 fee on options trades, even if you buy dozens of contracts in the same order. Reducing transaction costs on your trades will improve your return on investment.

Points to Consider with Automated Options Trading

Automated options trading allows you to test your ideas before implementing them and eliminates the emotional elements of trading. Like any investment, automated options trading involves risk. You should consider these factors before you begin.

Risk of computer and mechanical breakdowns

Automated options trading depends on a computer or server with an internet connection. If this connection is lost during market hours, the options AI will not be able to trade existing positions or make new purchases. You should invest small amounts of money in options trading software when you start. This approach will help you get familiar with the automated approach so you can adapt it to your portfolio.

Unpredictable market

Automated options trading removes the emotional element of buying and selling, but the market remains unpredictable. This risk is present with every investment, but it can mean that a gain in your portfolio suddenly turns into a loss. This risk is particularly present for options trading, and not just for automated options trading. You can set maximum loss limits where a trade automatically takes place at a certain price, assuming the options contract price does not crash when the market opens. This scenario usually occurs during an earnings report that does not suit you for an option set that expires at the end of the week.

Strategy over-optimization

Options trading software is designed to reduce the time you spend in your portfolio. Some traders spend as much time optimizing the parameters of their options trading strategy as they would buying and selling options contracts on their own. You won’t have a 100% win rate, and a bad week shouldn’t put you off if you focus on the long term and don’t take too much risk with each trade. It’s good to check out options trading software and not become passive, but you shouldn’t micromanage your automated options trading system either.

Options trading made for you

Automated options trading takes emotional trading out of the equation and saves a lot of time. Instead of watching various stock picks and following the news for hours every day, you can have an AI handle the trades for you. The options trading software will trade options based on your pre-determined parameters, so you are always in control.

Frequently Asked Questions


How do you trade options?


You can practice options trading with a simulated stock trader in real time or by testing your strategies.


Can you be a successful options trader?


Anyone can become a successful options trader by acquiring basic knowledge, performing due diligence, and modeling successful options traders.


Which tool is best for options trading?


Investors can choose from many options trading tools, each with their own advantages and disadvantages. It’s important to know what features interest you and then filter your search from there.


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