G-BOT can trade any instrument. However, it is recommended to focus on Futures (FUTs) or Options (FOPs), depending on your capital. From our experience, small investors often find trading S&P 500 options to be more comfortable for various reasons that will become evident with experience.

Trading these instruments presents several challenges, both technical and related to understanding how these instruments behave. The technical challenges, mostly associated with managing spreads and quotes, are addressed by the application through various complex mechanisms.

Understanding the behavior of the options pricing curve is crucial since it differs significantly from the underlying asset. Option movements are primarily influenced by the following factors, in order of importance:

• Market Volatility
• Decay (for OTM options)
• Movements of the Underlying Asset

One important index to watch is the VIX, which indicates how much the price of options is inflated. Volatility can have very violent surges that are extremely steep and often short-lived. It's essential to adapt to this pattern and view it as an opportunity for extraordinary profits.

Effectively exploiting these volatility surges is one reason you can outperform the market. However, it's equally important to have robust trading mechanisms in place to mitigate potential drawdown (DD). These DDs are often short-lived; however, they can be intimidating, particularly for novice investors, as the volatility curve surges unexpectedly before decaying amid wild fluctuations.

Trading Mechanisms to Reduce (or Invert) the DD

We employ several strategies, including:

1. Strict Exposure Control: Automated short entry limiters based on real-time margin requirements. Margin requirements change continuously, making real-time monitoring essential.
2. Permanent Long Legs: Maintaining some nearly ATM long legs can cushion against volatility bursts. This is a basic containment measure, providing reassurance to risk-averse investors. More active portfolio management is required.
3. Short-Biased Game with Long Trades: A strategy that aids margin recovery and profit enhancement. This approach locks in profits and can reverse exposure, though it may be hindered by outlier spreads during extreme moves.
4. Long-Biased Trading: This reduces decay quickly in case of volatility collapse, assisting margin recovery. It's essential to choose low theta and low price options while balancing with short legs.
5. Dynamic Delta-Gamma-Theta-Vega Neutral Strategy with Greeks Monitoring for Theta Capture: A sophisticated strategy where continuosly dynamically balancing the bull and bear side and being short on both CALL and PUT options, you can profit from time decay while closely monitoring Greeks to achieve a strongly balanced risk profile. In practice, the algorithm would continuously limit the adverse move of highly volatile ATM/ITM options, while at the same time balancing exposure and margin requirements.

Automated trading requires uninterrupted operations. Therefore, ensuring the trading machine remains connected at all times is critical, especially during volatile periods when significant profits can materialize quickly. Disconnecting may result in catastrophic consequences, including liquidation at unfavorable prices.

It is also crucial for effective hedging that trading accounts operate on a Portfolio Margin basis (risk-based methodology, not Reg T margin). More information can be found here: Interactive Brokers Portfolio Margin Guide.

In our experience, we have successfully navigated challenging market conditions and emerged profitably from large crashes. The exceptions occur when investors panic during peak drawdowns—closing positions at maximum loss during sudden volatility spikes. Never do that; we possess the means to handle various situations. Stay calm and reassess: there is always a way out. Trading can be challenging, and it may not suit everyone.

Never trade with fear. To achieve long-term success, maintain your composure. Resist the urge to exit trades during drawdowns at maximum loss. We are fully equipped to thrive and systematically generate profits.