Trading Software Tip: Be Smarter Than the Black Box (Software) Analysis

Options trading tutorial video by Charles Cottle, aka the Risk Doctor, showing how even the best stock market software can have glitches and errors even in the analysis of a simple covered call option with stock.  The trading platform software used in this demo by the Risk Doctor is tradeMONSTER, and the Risk Doctor shows how you can catch and fix such an error just with good foundation understanding of options.  Charles Cottle is a long time professional trader and options trading educator.  Charles Cottle was the co-founder of online broker thinkorswim and author of such options trading books as Options Trading: The Hidden Reality.

Video Transcript:

There’s a glitch, or it’s not updating.  (Referring to the tradeMONSTER options analyzer screen showing a short straddle instead of the covered call strategy).  you got to be smarter than the machine.  Look at what’s up there: it’s showing a short straddle.  There might be a delay in the feed or because the market is closed. I don’t know what it is.  But it’s not working, is it?  Because long 1000 shares and short 10 calls is not short a straddle.  So you have to be smarter than the analyzer.  That’s why position dissection is so important: because sometimes your systems aren’t reliable.  And I’ve used dozens and dozens of platforms, and every now and then something goofy happens.

What I’m going to do is exit out of it and reenter it.  Maybe that will fix it.  But don’t trust it.  You have to be smarter than the black box.  (Added long stock) So that’s right.  I get that.  That’s a slash.  Now I’m going to add a call, and I’m going to sell it.  And there we go, it’s fixed!  The tools you are given just need to reinforce what you know.  If you don’t yet know it, you have to study and learn it.

 

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