Trading Guardrails With AI

dennyzhang

URL: https://quantcodedenny.com/posts/llm-trade-common-scenarios/

Use AI to plan smarter trading decisions — systematically, calmly, and without emotional bias.

This post shows structured prompts to improve weekly options strategies, day trading checks, and long-term signal monitoring.

  • /cashsecuredput Plan a weekly cash-secured put on RKLB with strikes balancing premium and assignment risk
  • /coveredcall Plan a weekly covered call on RKLB with strikes minimizing assignment risk
  • /guardrail I plan to buy QQQ at $550
  • /tradeanalysis MSFT dip this week / Day trading QQQ today
  • /earlyalerts Reddit in tech/social sector

Commands & Workflows

/coveredcall → Weekly Covered Call Planning

Plan a weekly covered call to generate income while controlling assignment risk.

Example prompt:

/coveredcall Plan a weekly covered call on RKLB with strikes minimizing assignment risk

LLM checklist:

  • Recommend strike above current market price based on volatility and chart resistance.
  • Estimate probability of being called and premium yield.
  • Suggest rolling/exit triggers if price approaches strike.
  • Confirm rationale aligns with holding vs. selling preference.

Quick Decision Checklist:

  • Stock not in breakout mode.
  • IV rank > 25% (higher IV = higher premium).
  • Strike 5–10% above current price for low assignment risk.
  • Weekly premium > 0.8% of stock price if possible.
  • Defined plan for rolling or accepting assignment.

/cashsecuredput → Weekly Cash-Secured Put Planning

Plan a weekly cash-secured put to accumulate shares at a discount while collecting premium.

Example prompt:

/cashsecuredput Plan a weekly cash-secured put on RKLB with strikes balancing premium and assignment risk

LLM checklist:

  • Suggest strike & expiry balancing yield and assignment probability.
  • Estimate premium and probability of assignment.
  • Flag event risk (earnings, tariffs, large announcements).
  • Remind of capital lockup and required cash to cover assignment.

Quick Decision Checklist:

  • Stock stable or in uptrend.
  • IV rank > 30% (prefer higher IV for better premium).
  • Strike 5–10% below current price.
  • Target 0.8–1.5% weekly ROI (adjust to risk tolerance).
  • No major event risk this week.

/earlyalerts → Emerging Signals (6-month horizon)

Scan for early signals in companies/sectors using hiring, patents, filings, and fund flows.

Example prompt:

/earlyalerts Analyze early signals for Reddit in tech/social sector

LLM checklist:

  • Synthesize signals: hiring spikes, patent filings, executive hires, fund inflows.
  • Estimate confidence level and suggested monitoring cadence.
  • Suggest concrete next steps: filings to watch, KPIs (DAU, revenue indicators).

Quick Decision Checklist:

  • Multiple independent signals (news + hiring + filings).
  • No single-source hype (avoid false positives).
  • Monitoring plan: what to check weekly/monthly.

/guardrail → Emotional & Purchase Check (Always run before trades)

Check for FOMO/panic and validate trade reasonableness.

Example prompt:

/guardrail I want to buy QQQ at $550

LLM output structure:

  • Assessment: ✅ (neutral) / ⚠️ (emotional)
  • Buy? / Execute?: Yes / No
  • Confidence: 0–100%
  • Reasoning: Market context, catalysts, volatility, risk factors
  • Suggested Price / Execution Adjustments
  • Quick Habit: If flagged ⚠️, wait 24 hours or reduce order size / split execution.

Mini Checklist:

  • Is this trade plan-based or reactionary?
  • Are technical or fundamental reasons documented?
  • Is position sizing aligned with risk rules?

/tradeanalysis → Dips & Intraday Opportunities

Identify short-term dip buys or intraday setups (QQQ, sector ETFs, or leaders).

Example prompt:

/tradeanalysis MSFT dip this week
/tradeanalysis Day trading QQQ today

LLM checklist:

  • Confirm dip depth vs. recent ranges (5–10% typical dip band).
  • Check volume, VWAP, and liquidity for execution feasibility.
  • Provide suggested entry range, stop-loss, and profit target.
  • Note market-open / close behavior or news events that affect intraday flow.

Quick Decision Checklist:

  • Volume supports the move (no thin liquidity).
  • Entry near support/VWAP with stop below clear level.
  • Reward:risk meets minimum threshold (e.g., 2:1).
  • No conflicting macro/news in the session.

Weekly & Daily Routine

  • Monday: Run `/cashsecuredput` to plan cash-secured puts for the week.
  • Thursday/Friday: Run `/coveredcall` to harvest premium if holding shares.
  • Daily before trading: Run `/guardrail` for any planned trades; run `/tradeanalysis` for intraday opportunities.
  • Weekly: Run `/earlyalerts` to refresh long-term watchlist and re-prioritize ideas.
  • Logging: Record rationale, strikes, premiums, outcomes in a simple weekly journal.

Reflection Prompts (Weekly)

  • Did AI help me avoid emotional trades this week?
  • Were strike selections consistent with my risk profile?
  • What trade(s) deviated from plan and why?

Universal Rules

  • Tone: Calm, rational, focused on long-term value.
  • Basis: Verifiable facts (current prices, historical trends, news).
  • Key Insights: Include reusable patterns or indicators in each output.
  • No Financial Advice: Outputs are analytical tools for consideration only.
  • Output Discipline: Follow each workflow to reinforce habit and consistency.
  • Use first-person framing: “I will check /guardrail before executing a trade.”

Common Pitfalls

  • Selling puts on clear downtrends without a trend-reversal thesis.
  • Writing calls too close to resistance when you want to keep the stock.
  • Ignoring assignment cash requirements for cash-secured puts.
  • Trading through major events (earnings, tariffs) without adjustments.

Key Takeaway

AI enforces structured thinking and consistent habits. Use the commands to run repeatable checks, document decisions, and improve trading quality over time.