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    Why did I get a conflicting trades message?
    • 09 Aug 2023
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    Why did I get a conflicting trades message?

    • Updated on 09 Aug 2023
    • 3 Minutes to read
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    Article summary

    Question: I received an error saying there was a problem with my strategy because there were conflicting trades. What does this mean and how can I prevent it?

    For pre-defined strategies with user-defined deltas

    If you are using a standard strategy (not custom), then the reason for the conflicting trades is generally because you used the same delta twice in the user-defined delta settings. When your strategy deltas are too close together, the backtester will not be able to find unique strikes to satify the delta settings. This is only an issue for strategies using either 2 calls or 2 puts, like a call spread or put spread or condors. It is fine to use the same delta across calls and puts (such as in a straddle).

    To fix for non-custom strategies: Click the setting gear in the top right, and either uncheck custom deltas, or change one of the deltas in the vertical pairs to be further apart.

    For Custom Strategies

    In short, either your call deltas or put deltas are too close together, or your call days to expiration or put days to expiration are too close together.

    Understanding what's really happening:

    The TradeMachine® has various protections in place to make sure that the backtest results that you are getting are as close to what you are trying to test as possible. The TradeMachine® has four such protections - the first three only check calls against calls and puts against puts, the third checks for calls or puts with a 50 delta.

    For strategies with 2 or more calls, or 2 or more puts, the TradeMachine ensures that:

    1. If the call deltas or put deltas are the same, make sure the strikes are the same.
    2. If the call deltas or put deltas are different, make sure that the strikes are also different, and that the strikes that should be higher, are.
    3. If the call days to expiration or put days to expiration (aka rollover) are different, that the shorter length option expires before the longer length option. If the days to expiration are the same, make sure the expirations are the same.

    If there are two or more 50 delta options, whether calls or strikes, make sure that:

    1. All 50 delta options have the same strike.
    Examples of conflicting strategies, and how to fix them:

    Example 1: Deltas too close together, such as: Puts with strikes 49,51,50

    The problem here is that after the TradeMachine® fills the 49 delta put, it will look for a 51 delta put with a higher delta (for puts, higher strikes are more in the money with higher deltas). Now, finally, the TradeMachine® will try to find a 3rd strike between the 49 and 51 delta strikes and will almost never be able to succeed.

    The fix > spread out the deltas, such as 40, 50, 60.

    Example 2: days to expiration too close together, such as: 7 day - 30 day call time spread

    This strategy will work fine for symbols with weekly option expirations like AAPL, but for symbols with fewer expirations, like ANET, the TradeMachine® will fill the backmonth (30 day) options first, and then, often, be unable to find options that expire before the 30 day options. Depending on the timing, the 30 day expirations may find options that expire in 40 days are the closest to the 30 day desired option length, in which case, the 7 day options will find a different expiration that expire about 10 days in the future. This strategy would then be able to briefly generate results before running into problems at the next expiration.

    The fix > spread out the days to expiration to match the spacing of the option expirations, such as 30-day, 60-day.

    Why doesn't the TradeMachine® just find expirations that are as close as possible for TimeSpreads when there aren't expirations that match the days to expiration?

    While we could do this, we feel this would be a disservice to our users. If a user is trying to test, for example, a weekly strategy on a symbol that doesn't have weekly options, returning results for a 30-day 60-day time spread could lead the user to incorrect conclusions about the successfulness of the weekly strategy in general.

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