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All You Need to Know About Auto-Trading


Auto-trading is basically money management, but vast majority of newsletters are not licensed to manage money. Would you give your hard earned money to amateurs? I assume most people would give a negative answer to that question - yet, by participating in an auto-trading service, this is exactly what they do. Is it stupidity or ignorance? You decide.

What is auto-trading?

 

Auto-trading is when subscribers of trading newsletters prefer that their accounts be traded automatically based on the newsletter's trade alerts. With auto-trading you can allocate a portion or all of your account (percentage, dollar amount, or number of units) per recommended trade and the service provider places the trades for you.

 

Most newsletters send the broker emails including trade alerts and the broker's trade desk places the orders in the client accounts. In some cases (like auto-trading with Interactive Brokers), this is done through third party providers (Global Auto-Trading). Please read SEC Risk Disclosure on Autotrading.

 

What are the risks of auto-trading?

 

Before you enroll in an auto-trading service, those are the questions you need to ask about a newsletter offering auto-trading program:

  1. Is the newsletter a licensed investment adviser? SEC considers newsletters that engage in auto-trading to be investment advisers. If the newsletter is not an investment adviser, by engaging in auto-trading they are breaking the law and are exposed to lawsuits like this one. Since an auto-trading service is basically equivalent to money management, SEC requirement makes perfect sense.
  2. Is the newsletter a one man operation? What happens if that man gets hit by a truck or breaks a leg? Does he have a backup to continue trading your money? What if the trade(s) need to be adjusted or closed in a timely matter? Are you at risk of catastrophic losses if this happens?
  3. What if the markets starts to move fast? Will his broker get the email with trade instructions fast enough? What if the prices are significantly different by the time the broker tries to place an order?
  4. Do you understand the rationale behind the trades or you just trust the newsletter blindly to place the trades in your account?


For most newsletters, auto-trading is actually illegal!

 

Those are some of the reasons why I cannot auto-trade SteadyOptions strategies. I'm not a licensed investment adviser, I cannot place the trades in members accounts and I'm just not willing to break the law like most other newsletters do.

 

Some newsletters would consider it a gray area. Let me be very clear: there is nothing gray about it. If autotrading is done by someone who is not an investment adviser, it is illegal. Period. Not a gray area. Black and white.

 

Unfortunately, many people found out the hard way that giving their money to amateurs is usually not a smart move. Many services simply blew out members accounts. Some of them just closed out, others did a "portfolio reset". Unfortunately, in real life people cannot reset their portfolios after losing 80-100% of them.

 

How our auto-trading is different from most other services?

 

Unlike SteadyOptions, our other strategies are managed by licensed investments advisers. That means that the trades are placed directly by Lorintine Capital, LP. By doing that, we are eliminating the middle man (the broker's trade desk or GAT). This creates better and more reliable execution, especially in fast moving markets, and reduce costs. Most other competing services cannot do this because they are not licensed investment advisers. In addition, we have backup, so if for any reason, one of our advisers is unable to place the trades, he is backed up by another adviser who has full access to all accounts. In addition, all trades are placed and discussed on the forum, so you can have a full understanding of the rationale behind the trades.

 

Which strategies are auto-traded?

 

We auto-trade Anchor Trades and LC Diversified Strategy. We will be supplementing this with more strategies in the future as we expand. Contact Chris and Jesse for more details or me through the site if you are interested.

 

We auto-trade the following account sizes:

  • Anchor Trades: $50,000-120,000
  • LC Diversified Strategy (included as a bonus with all subscription plans): $10,000-120,000.


For larger account sizes, we recommend using our Managed Accounts.

 

Clients have full access to their accounts through either tdameritrde.com or advisorclient.com. They can view them at any time. They can deposit/withdraw cash as needed by contacting us or doing it themselves online, as long as they stay within the specified range.

 

Which broker we use and how much does it cost?

 

We are using TD Ameritrade Institutional. We will provide you with all necessary paperwork to open a TD Ameritrade Institutional account. Lorintine Capital has negotiated a competitive commission rate of only $0.75/contract with no ticket charge, and we are optimistic about further reductions in the future as monthly contract volume grows. Auto-trade commissions are based on the volume of all accounts so everyone will benefit from future reductions regardless of account size.

 

The auto-trading fee will be $50/month per account per strategy for the first strategy/account, and $40/month for each subsequent strategy/account. The fee will be deducted directly from your trading account. For comparison purposes, GAT is charging $70/month for the first service and $30 for the second service. They count each allocation line as a service for auto-trading billing purposes, so they might consider Steady Condors as two services and charge $100/month. In addition, for accounts larger than $100k, a multiplier is applied to the per-service fees.

 

When considering the benefits of direct execution, low commissions and low auto-trading fees, our auto-trading program is among the cheapest available on the market.

 

To be eligible for auto-trading, you need to maintain an active subscription to the respective service. The auto-trading fee is in addition to the subscription fee you pay for the service. Members can still remain self-managed if they want and continue paying the subscription fee only. We continue posting the trades on the forum.

 

You can auto-trade several accounts under your name or your spouse name. Each account will be charged a separate auto-trading fee, but you will pay only one service subscription fee.

 

How to start

 

If you don't have an active subscription, subscribe to the appropriate package. After your forum account is activated, please contact us for further instructions:

 

For LC Diversified, PM or email Jesse Blom at jblom@lorintinecapital.com.
For Anchor Trades, PM or email Chris Welsh at cwelsh@lorintinecapital.com.

 

Or you may email me with any general questions at info@steadyoptions.com

 

You are welcome to post your questions/comments.

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Question: If autotrading is illegal, how all brokers agree to do it?

 

Answer: Brokers are not legally obligated to check if a autotraded newsletter is an investment adviser. Of course they should do it by any ethical standards, but lets not be naive: you cannot seriously expect them to give up one of their biggest cash cows. They do much worse things. For example, TDAmeritrade running RedOption newsletter and TradeMonster running the OptionMonster newsletter. it's a HUGE conflict of interests, but somehow they get away with it.

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We might at some point. But this strategy is much less active than SO and requires much less maintenance and monitoring. We want it to be as boring as possible.

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