P&L Action: ITM Protection

1. Purpose and Overview

ITM Protection (In The Money Protection) is a Profit & Loss Action that closes a Trade as soon as it goes in the money.
This prevents contracts from expiring in the money unintentionally.

2. Prerequisites and Visibility

ITM Protection appears exclusively when within a Trade Template:

• a Stop Loss has been set for the Trade, and
• this Stop Loss is configured via a REL Order.

Only when both conditions are met will ITM Protection become visible in the Template and can be activated.

ITM Protection can be defined at the Leg, Group, or Combo level.

3. How It Works

ITM Protection is based on two parameters that are controlled together:

1. Absolute dollar amount (USD)
   • Defines how far the contract can go in the money before the Stop Loss is triggered.
   • Example:
     • Value = 0: The contract is immediately stopped out as soon as it goes in the money (i.e., directly at ATM).
     • Value > 0: The contract is allowed to go in the money by the specified amount before the REL Order takes effect.

• Minutes (Time to Expiration)
  • Determines after how many minutes before market close ITM Protection becomes active.
  • Example:
    • Value = 30: The protection function activates only in the last 30 minutes before market close.
    • Before this time, ITM Protection remains inactive.

4. Practical Example

A trader executes a Short Put with a Stop Loss set (REL Order).

• ITM Protection Dollar = 1 USD
• ITM Protection Minutes = 5

Result: If the Short Put is at least 1 USD in the money in the last 5 minutes before trading ends, the Stop Loss is triggered immediately and the Trade is closed.

5. Notes on Application

• ITM Protection is a mechanism that was used by German traders until 2024, as losses from options expiring in the money could not be offset for tax purposes.
• Beyond that, ITM Protection is useful if you don't want to be so dependent on late market movements.