Entry and Exit with Short/Long Ratio

Updated: May 6, 20263 min read

1. Overview

The Short/Long Ratio describes the relationship between the total short premium and the total long premium of an options structure.

The calculation follows this logic:

Short/Long Ratio = total short premium / total long premium

In OptionsApp, the Short/Long Ratio can be used in two places:

as an Entry Filter in the Trade Template
as a P/L Action to automatically close a trade

At Entry, the system checks whether the Short/Long Ratio falls within a defined range before the trade is opened.

At Exit, a trade can be automatically closed if the Short/Long Ratio falls below a defined value or rises above a defined value.

2. Short/Long Entry Ratio

The Short/Long Entry Ratio is activated in the Trade Template under Advanced Settings.

There you will find the option Use Short/Long Entry Ratio.

When this option is enabled, you can define a Min value and a Max value.

The trade will only be opened if the calculated Short/Long Ratio falls within these two values.

2.1 How it works at Entry

The Short/Long Entry Ratio acts as a pure filter.

This means:

OptionsApp first searches for the trade based on the defined search criteria.
Then the Short/Long Ratio of the found Combo is calculated.
If the Ratio falls within the defined Min/Max limits, the trade can be opened.
If the Ratio is outside these limits, the trade will not be opened.

The check is performed once before the trade is opened.

2.2 Example for Short/Long Entry Ratio

A trade should only be opened if the Short/Long Ratio is between 2.00 and 5.00.

Configuration:

Enable Use Short/Long Entry Ratio
Min: 2.00
Max: 5.00

Meaning: OptionsApp first searches for the suitable trade. Then it checks whether the ratio of short premium to long premium falls between 2.00 and 5.00.

Only if this condition is met will the trade be opened.

3. Exit When Short/Long Ratio

Exit When Short/Long Ratio is a P/L Action in the Trade Template.

This function can be used to automatically close a trade as soon as the Short/Long Ratio leaves a defined range.

The function is only available at Group or Combo level.

On individual Legs, the Short/Long Ratio is not meaningfully applicable, since a single Leg is always either Short or Long. At least one Short Leg and one Long Leg are required for the calculation.

3.1 Visibility of the function

Exit When Short/Long Ratio appears only if the respective Group or Combo contains both Short and Long positions.

If a Group or Combo consists only of Short Legs or only of Long Legs, no Short/Long Ratio can be calculated. In this case, the P/L Action will not be displayed.

3.2 How it works at Exit

At Exit, the system does not check whether the Ratio falls within a range. Instead, it closes when the Ratio falls below or exceeds a defined threshold value.

Two threshold values are available for this:

is below: triggers the Exit if the Short/Long Ratio falls below this value
or above: triggers the Exit if the Short/Long Ratio rises above this value

As soon as one of these values is reached, OptionsApp executes the configured Close Order.

3.3 Example for Exit When Short/Long Ratio

A trade should be closed if the Short/Long Ratio falls below 1.00 or rises above 10.00.

Configuration:

Enable Exit When Short/Long Ratio
is below: 1.00
or above: 10.00

Meaning: OptionsApp monitors the Short/Long Ratio of the respective Group or Combo. If the Ratio falls below 1.00 or rises above 10.00, the trade is closed.

4. Close Order Type

With Exit When Short/Long Ratio, you must specify how the closing should be technically executed. You can choose between Market Order and Limit Order.

With a Market Order, the closing is executed at the next available market price.

With a Limit Order, the closing is executed via a Limit Order. In this case, the Exit Behaviour must be defined in the Trade Template used. The Exit Behaviour determines how the Limit Order is placed and processed further.

Further information can be found in the article: Execution Logic (Entry & Exit Behaviour)

5. Usage Notes

The Short/Long Ratio depends directly on the premiums of the Short and Long Legs. It can therefore change depending on market movement, spread, time to expiration, and liquidity.

The Min/Max values you choose at Entry as well as the Below/Above values at Exit should always match your respective strategy.

Especially with more complex structures or less liquid options, you should verify whether the Short/Long Ratio is a meaningful control value for your particular strategy.