Working with Brutus - A Few Key Terms to Know
Your Brutus Options Strategy, or simply Strategy, contains all the necessary specifications for Brutus to rank the options markets on your behalf.
Your Brutus Options Strategy consists of what options setups you would like to use. Note that these are called 'strategies' with some educators and sites. You also need to set your market group, which is a collection of stocks that Brutus will start with when working on your strategy.
Once you have set your setup and market, your trading alternatives are fully defined and Brutus will have a group of options trades to evaluate.
Finally, you will need to set what options trading criteria to rank your strategy against, and the associated weighting of all your criteria.
Brutus Options Ranker Strategy Tree
A Strategy Tree is the visual organization of your strategy’s objective, groups, and criteria. The market and setup types define which alternatives flow up this tree to a final ranking.
Your Brutus Options Ranker Strategy's Objective is the goal of the strategy and the top box in your strategy's tree. Remember, that alternatives 'flow up' through the tree in the evaluation. This is why the top box is your objective, because it gives you your final score.
The objective also serves as the strategy name. We suggest you use a descriptive name for your strategy so you keep your objective very clear and in mind.
For example, your strategy's objective might be:
sell cash secured puts that maximize return while minimizing risk on a time horizon of 30-45 days.
Setups are combinations of puts and calls that you would like to use in your strategy. E.g., if you sell a put that is close to the current trading price and sell a second put that is further away from the trading price, then you are using a put credit spread.
Setups & Strategies
A setup is synonymous with an "option strategy” that you might see elsewhere. However, at OptionAutomator, we use the term “Setup” vs. "strategy" to avoid confusion with your Brutus Options Ranker Strategy.
Brutus works your strategy, which is a combination of your objective, market group, setup, criteria, and your weighting preferences.
Alternatives – Alternatives are either individual options contracts alternatives or different spreads/setups that Brutus exhaustively evaluates and compares against one another to form their ranks. This optimization is against your trading criteria and Brutus' proprietary decision making algorithm, which is based on multi-criteria decision making (MCDM).
Criteria are attributes of the alternatives that Brutus must optimize. Each attribute can either be maximized, minimized, or targeted to a specific value.
For example, you may want to maximize your maximum annualized return while minimizing your risk criteria, among many other criteria. There is no limit to the number of criteria that you can add to your strategy and we are adding new criteria to the software all the time.
Strategy's Criteria Groups
Criteria Groups can be used when a single criteria cannot be optimized by one variable (e.g., risk) then you have Brutus to look at multiple criteria to minimize risk in a single grouping.
For example, in order to minimize risk when selling naked puts, you may create a generic group for "minimize risk". In such a parent group you might consider adding "Minimize Gamma", "Maximize % Out of The Money", or "Minimize Notional Risk" among others.
While you are building up your Brutus Options Ranker Strategy, you can test the performance at any time the strategy shows that it is complete by clicking the run test button. This shows you results in Sandbox mode. Note that these are genuine results, but on a subset of 2-week old market data.
You Now Have the Vocab!
You should now be familiar with the key terms used throughout the Brutus Options Ranker. We hope you found this article helpful, please like or dislike it below so we can continue to improve our knowledge base content.