P&L Action: Profit Target
The Profit Target function in OptionsApp allows you to automatically close positions once a defined profit has been reached. This profit threshold can be defined as a percentage of the premium paid, as a fixed profit amount or as a fixed price of the combination. The function is available for individual Legs, groups, or Combos and is activated via the P&L Actions section.
1. How it works in OptionsApp
In the P&L Actions area, you can activate a Profit Target. You can set the profit level (in percent, as an amount or as a fixed price) at which the position should be fully or partially closed.
Example illustration:
In this example:
- Once the trade is 50% in profit, it will be closed at 100%.
2. Percentage, fixed amount (Amount) or fixed price (Price Level)
Whether the Profit Target is defined on a percentage basis, as a fixed amount or as a fixed price can be set in the first dropdown menu of the Profit Target row:
- Percentage: Closes when the specified profit percentage is reached (based on the Entry premium).
- Amount: Closes when the specified absolute profit amount is reached.
IMPORTANT: This refers to the profit amount-how much profit the option/combo has made-not the remaining value of the option/combo. - Price Level: Closes as soon as the combination reaches a fixed price. Instead of a distance from the entry, you enter the limit price of the closing order itself.
Example:
- With a $2.50 Entry premium, a 50% Profit Target means a profit of $1.25.
- Alternatively, you can specify "Amount at $1.25" as an absolute amount.
- The difference is that with a fixed amount (Amount), the profit amount is always $1.25 regardless of the Entry premium. In the case of "Percentage", the profit amount would be calculated depending on the Entry premium.
Price Level: mind the sign
The price uses the same scale as the Price column in the Dashboard. Whether it is positive or negative depends on how the trade was opened:
- Credit trade (premium received, e.g. short put spread): the price is negative. A spread sold for $2.00 that should be bought back at $0.30 is entered as -0.30.
- Debit trade (premium paid, e.g. long call): the price is positive.
Rule of thumb: on this scale, the Profit Target must be above the entry price. In the example, -0.30 is above the entry price of -2.00.
With multiple Profit Targets, each price must be higher than the previous one. Otherwise the Trade Template cannot be saved and the message "Each profit target price must be higher than the one before it!" appears.
Before opening, OptionsApp checks whether the price is reachable for the combination and above the current mid price of the legs. If a check fails, for example because of a missing minus sign, the trade is not opened. The message then reads "Configured price level on the wrong side", followed by the exact reason.
3. Close percentage
In the "close" field on the right, you can define what percentage of the position should be closed when the target is reached.
Note that a value less than 100% only makes sense if you've defined more than 1 entry in your strategy (Quantity > 1) and you want the Profit Target to apply only to part of the positions.
- 100% means: All open positions will be closed.
- Less than 100%: Only part of the positions will be closed - this only makes sense if more than one position is running simultaneously.
Use case for Close values under 100%
For example, if you plan to open a trade 2x (Quantity = 2) and the Profit Target should apply to only one quantity, then enter 50% for close.
Important:
In the vast majority of cases, you'll work with a Close percentage of 100%. The scenario of opening multiple positions and closing only part of them is relatively rare.
Use case for odd Close values
When Close values result in decimal percentages due to poor divisibility of the position, it's important to understand how percentages are interpreted internally. OptionsApp uses rounding-down logic, so for example, entering 66% for a three-part position will only close one trade-only 33.33% (rounded down). To actually close two of three positions, you should instead enter 67%. The value must exceed the calculated threshold so that it rounds to the desired number of contracts in execution. For odd position sizes, it's therefore recommended to adjust the percentage slightly upward to ensure the expected behavior.
We strongly recommend testing the desired behavior in Paper Trading first in such cases!
4. Define multiple Profit Targets
It's possible to add multiple Profit Targets-for example:
- At 30% profit: Close 50% of the position.
- At 60% profit: Close the remaining 50%.
This is done via the "Add target" link on the right side of the module.
IMPORTANT: This setting only makes sense if, for example, 2, 4, or 6 trades are opened. A single trade cannot be split!
5. Typical practical application
Example 1:
A 0DTE trade (e.g., a Short Put with $1.50 premium) should be automatically closed at a profit of $0.75 (50%).
Configuration:
- Type: Percentage
- at: 50%
- close: 100%
Example 2:
A trade should be opened with 2 positions, but only one of the positions should be closed with a Profit Target at 70% profit.
Configuration:
- at: 70%
- close: 50%
6. IMPORTANT to note
When configuring, you must always consider what order will result from it and that it must be accepted by the TWS.
If contradictory or nonsensical configurations are made, it can lead not only to rejection of the Profit Target order but also to issues with other mechanisms (e.g., an attached Stop Loss order).
Below are 2 negative examples that can cause such problems:
- If a position is configured with, for example, $0.75 Amount and close: 90%, but only one position is open, this can lead to unexpected behavior-since 90% of one position is not clearly executable.
- If, for example, a 100% Profit Target is configured on a Credit Spread, the TWS will reject the order (because a Limit Order for a Short position at $0.00 is not accepted).
7. Profit Target in Extended Hours
You have the option to activate the Profit Target order outside regular trading hours. To do this, you must check the "Activate on ext. hours" box:
This specifically means that all other active orders of the Trade Template are only active during regular trading hours, except the Profit Target order. This can be useful for multi-day trades, since a Profit Target order always places a Limit Order, which generally excludes execution worse than the limit.