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ThetaTrader Six-Legged Dragonfly Strategy Erik Gebhard

What is the Six-Legged Dragonfly futures options trading strategy? What is the appeal of it over simpler trading strategies? How does Altavest’s technology ThetaTrader make the process easier? Erik Gebhard—the co-founder and CEO of Altavest—shares what it is and how you can make it happen with their technology—ThetaTrader. If options trading is up your alley, so is this episode!

@altavest talks about the six-legged dragonfly trading strategy and his trading software in this episode of How To Trade It. Check it out! #stocks #stock #trading #StockMarket #Investing #invest #DayTrading #StockPicks #futures #options… Click To Tweet

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You’ll want to hear this episode if you are interested in…

  • [1:13] Erik’s background in the industry
  • [3:00] Trading in futures options
  • [5:45] The catalyst to start Altavest
  • [7:30] Simplifying a difficult process
  • [10:00] The six-legged dragonfly strategy
  • [13:58] Who needs ThetaTrader?
  • [17:02] How they came up with the tech
  • [19:38] How Erik learned this strategy
  • [20:10] The probability + winning percentage
  • [25:06] How to learn more about ThetaTrader

Why futures options?

Erik shares that the average daily volume of the S&P 500 eMini futures contract is 2.5 times greater than all of the ETFs in the world. The futures space is where all of the activity is. Why? The appeal is the bid-offer spreads, higher volumes, leverage, and liquidity.

You can control a large position with a relatively small amount of money. But there’s a lot of risk in it. If you have $1,000, you can essentially control a $10,000 asset. Every point the market moves is magnified by ten times. If you’re on the wrong side, it’ll hurt.

Options can be one of the most difficult things to learn. There are many variables. There are expiration dates and other ways the trade can go wrong. It can be mind-boggling. That’s why Erik and his partner sought to simplify the process.

Simplifying a difficult process

A lot of people struggle with options. It’s almost like buying a lottery ticket. When you start to incorporate spreads ( selling options and collecting a premium), the problem becomes unlimited risk. So they started working on refining the approach. It was incredibly complicated. There are so many moving parts and variables. They needed technology, so they created ThetaTrader—an options trading software borne out of necessity. It’s the wizard behind the curtain.

How does @altavest the difficult process of futures options trading? What technology did he and his partner develop? Learn more in this episode of How To Trade It! #stocks #stock #trading #StockMarket #Investing #invest #DayTrading #StockPicks… Click To Tweet

The Six-Legged Dragonfly Strategy

You have to trade in markets that will provide the volume you need. Erik would trade an index versus a stock because it’s less volatile. The dragonfly is done using algorithms they created. It’s presented as a package at one unit at one price. Their software places all 6 trades as one “object.”

The software preselects the strikes for you. You’ll know the strikes, the value, and the target price. Once you have that trade placed, it’s executed and filled. The trade gains in value as time goes on. The software automatically closes the position if it reaches a profit target or a risk target.

You need to be trained on options and know what you’re doing. This helps people stop sitting in front of a screen for so long. You need to know the basics of options and the software builds on and refines that.

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Necessity is the mother of invention

To collect a premium efficiently, they needed technology to help them. The tech has evolved over the years. When they first started, it was paper trading. It wasn’t a fully automated system. You’d have to call or email a trade in. ThetaTrader was created 6–7 years ago and refined ever since. It’s been the same strategy but the tools to make it easier have been developed along the way. The basic structure of the trade is the same. The algorithm takes into account the different dynamics of the market.

The probability + winning percentage of futures options

The probability is higher, the winning percentage is higher, but you can lose a larger percentage. You could win $200 when you win, but lose $300 if you lose.

Erik notes that when you’re collecting a premium, you’ll have a lot of base hits and some bunts. There will be times where you strikeout. With any kind of trading, you have a stop loss in mind. The problem is when the stop approaches and you decide to cancel it, throwing risk management out the window. The whole thing can go sideways in a hurry. ThetaTrader automates risk management so you’re not left making emotional decisions.

If you place a condor spread, you may have $1,000 at risk. Your maximum gain may be only $100. But the probabilities are 90% or greater. You still have to manage the risk and close the trade when you need to.

The extra two legs of the dragonfly strategy are additional insurance that allows the trade to behave differently than a condor. If you lose a trade with a condor, you could still take a profit with the dragonfly. The extra options act as a risk bugger. The targeted amount of return is a little less than a condor because you’re insuring your risk.

What is the probability + winning percentage of futures options? @altavest shares more about his strategy and the software that he and his partner created in this episode of How To Trade It! #stocks #stock #trading #StockMarket #Investing #invest… Click To Tweet

Resources & People Mentioned

Connect with Erik Gebhard

Connect With Casey Stubbs

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