How-To Allocate Equities
How the allocation works
Capital allocation is a two step process. First you allocate a portion of your investment account's Net Liquidation Value (NLV) to Tiblio AI. Second, you add an equity and allocate a percentage of that to the specific equity.
Example
If your account has an NLV of $100,000 and you allocate 10% of it to Tiblio AI. Set the Allocation to 0.1 in the main strategy configuration settings. That limits your use of Tiblio AI to a total of $10,000 position size for all equities that are configured.
Then if you configure F, for example, with 50% allocation. Then you set the allocation for F to 0.5 and the position size is limited to 50% of $10,000 or $5,000. If F is trading at $10 per share then the position size is limited to 500 shares or 5 put options.
You can calculate it the other way too. If you want your position in F, in this example, to be approximately 200 shares, then you take that and multiply by the share price, $10, and you get a position size of $2,000. Then divide that by the amount you allocated at the main strategy level, in this case, $10,000 and you get an allocation for F of 0.2.
Share prices fluctuate, so you may want to allocate a tiny bit more. For example, if you allocated 0.2 but the share price rose to $10.50, then the maximum position size would fall to $2000 / 10.50 which is 190 shares. That would be large enough for only 1 put option. All of these details are logged in the Activity section so you can monitor that to see how your allocations are working.
Please note that if there is not enough total capital allocated to a particular equity for at least one put option (100 shares times the share price) then no orders will be sent.
Covered Call options
You can configure Tiblio AI to sell call options on your equities. It will only sell call options once shares are in the account. Either from put option assignment or from you purchasing shares.
Roger will sell covered call options regardless of the allocated position size because selling a covered call option does not impact the margin requirement of your account.
Ensure that you do not wind up in a naked short position
If your brokerage account is approved for naked call writing then you must pay close attention to your positions and ensure that you do not wind up with too many short call options. It would be extremely rare but it is possible especially if you're submitting orders at the same time or if you close stock positions after the call options are sold.
If you're concerned at all, have your broker remove permission for naked call writing.