I have been thinking about it for a long time. Should I learn to automate my options trading?

So, I reached out to Scott Clark from Trade Steward and asked: How can I best get start to automate options trading? Trade Steward is one of several trade automation platforms out there. Scott Clark is Director of Customer Success, and has been trading options since 2015.

In this video, Scott explains trade automation and the steps you should take if you want bots to execute some of your options trading strategies.

Learn how to automate options trading in this video

The video was produced with Streamyard – an easy-to-use and amazing tool for live streaming and recording.

This is trade automation

Trade automation involves software platforms that use bots to execute predefined trading strategies. Traders input parameters like delta, spread width, profit targets, and stop-loss levels, allowing the bot to handle trades automatically. The automation platform connects to brokers through APIs.

Why automate your options trading?

Automation uses software (“bots”) to execute trades based on predefined rules, removing emotions and manual errors. The automation platform connects to brokers through APIs.

Scott mentions several benefits in the video:

• Error reduction: Bots eliminate manual mistakes, preventing busted trades that cost money.
• Time efficiency: Automate repetitive tasks to focus on strategy development.
• Scalability: Deploy one strategy across multiple accounts without manual effort.
• Discipline: Bots stick to your trading plan, avoiding emotional decisions.
• 24/7 execution: Enter/exit trades even when you’re offline.
• Works well with backtesting: Stick to proven backtested setups without deviation.

Scott says: “Automation is like self-driving for your trades—you’re still in control, but the grunt work is handled for you.”

Many platforms

There are many products and platform offering options traders to automate their trading. Four of them are mentioned in the video:

• Trade Steward
• Option Alpha
• Option Omega
• Trade Automation Toolbox

Risks to watch for

As with manual trading, trade automation is not without risks.

Scott warns of potential issues like data glitches from brokerages, which can disrupt bot performance. This has happened a few times during the last couple of years, but has, according to Scott, been solved quickly.

He advises against a “set it and forget it” mindset, comparing automation to supervised self-driving cars. Traders must monitor bots to avoid costly errors, especially during volatile markets.

How to start automating options trades

For traders new to automation, Scott recommends starting slow to avoid busted trades from misconfigured bots. Here’s how to begin:

1. Sign up for a trial: Many platforms offer seven-day trials to test the waters.
2. Start with one bot: Configure a single bot to match a back-tested strategy, ensuring it performs as expected.
3. Test without risk: Use features like Trade Steward’s test runs to verify bot settings without real money.
4. Scale gradually: Add more bots as you gain confidence, avoiding over-leveraging early on.

Understanding options fundamentals is crucial, especially for beginners. Scott says that it is particularly important to understand well how volatility and leverage influence options pricing.

Backtesting is the sibling of trade automation

Backtesting and trade automation have great synergies, says Scott. Many traders like to backtest options strategies, for instance, using Option Omega, and then replicate that strategy in their trade automation tool.

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Three tips to automate options trading

Scott offers three key tips to succeed with automation:

• Start slow: Perfect one bot before scaling to ensure accurate execution.
• Have a plan: Define your strategy clearly to guide bot settings.
• Join a community: Connect with other traders to share ideas and stay disciplined.