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Loss Limiter for Options Trading

It's not just Red Bull and KFC that give you wings! AlgoTest gives you wings as well.

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We are excited to announce our new feature Loss Limiter which can save you from unlimited losses.
A loss limiter is a way to identify and automate the process of finding and adding suitable hedges(wings) to your options strategies.

Why Loss Limiter?​

Sometimes during heavy market movements the Stop Losses on your Straddles or Strangles  might get skipped. This could potentially lead to heavy losses for your running strategies.
To make sure this doesn't happen, you can define the risk by hedging your strategy using wings. 

The loss limiter helps you to find the hedge legs to save you from unlimited losses with just one click.  

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This feature is available for both the :Simulator and :Strategy Builder.

On the Strategy Builder​

  • First go to the Strategy Builder page and create a position with unlimited loss.

  • Here we have sold a strangle that has unlimited loss, but we can limit the loss by adding hedge legs (wings) to it by using the Loss Limiter feature. We just have to click on the loss limiter button which can be found on just below of unlimited loss.

  • After clicking on the Loss Limiter button it will show you an option to enter the max loss value that we want for this position. After adding the value it will find the wings for our position which reduces our unlimited loss close (but not the same) to the value we entered.

For eg. - Let's say here we want our maximum loss for this position to be Rs. 7000 so we will enter Rs. 7000 value and, will click on "Find Wings".

  • After clicking on add wings it will find the wings which will make our maximum loss close to Rs. 7000.

What if you want to change your Loss Limiter Value? ​

  • If you want to try a different maximum loss value in the loss limiter you'll first you have to remove the current wings from the position tab.  Click on the delete icon which can be found in front of your wings position to do so.

  • After deleting the wings from your position you can now check your position with different maximum loss values.

  • Let's say you now want the maximum loss to be Rs. 5800. You just have to enter Rs. 5800 in the Loss limiter and click on "Find Wings".

  • The Loss Limiter will find the wings for your position in a way that makes your position's Max Loss close to Rs. 5800.

Error State in Loss Limiter​

  • If your entered loss value is too low or too high the Loss Limiter will not be able to find wings for your position and it will show you an error as shown below. 

To solve this error you just have to adjust your loss value.

On the Simulator​

  • Similarly, the Loss Limiter can be used on the Simulator. You just have to click on the Loss Limiter which can be found just below the max loss in the Simulator page.

  • After clicking on the Loss limiter add the maximum loss value that you want for your position and then click on "Find Wings" it will find the wings for your position in a way that will make your maximum loss close to the value which you entered in the Loss limiter.