Options Scanner Manual

Transcription

1 Page 1 of 14 Options Scanner Manual Introduction The Options Scanner allows you to search all publicly traded US equities and indexes options--more than 170,000 options contracts--for trading opportunities that match your criteria. The Options Scanner can help you uncover: Naked and covered puts and calls Any complex option strategy to find the missing leg Calendar spreads Search is performed against ivolatility s Options Database, HyperFeed s Ticker-Plant and ivolatility s Implied Volatility Calculation Engine. The system updates in real-time against a 20-minute delayed market data feed. The Options Scanner searches both individual contracts and complex strategies to find trades that match your stated criteria. Search using either the Basic or Advanced views. By default, the Options Scanner searches all equities in our database. You can limit this list by specifying a personalized list of equities, separating ticker symbols with commas. This filter is available in both Basic and Advanced views.

2 Page 2 of 14 Basic View Use Basic view in the Scanner to search by the following criteria: Cost - the relative cost of the option based on theoretical value Moneyness the amount any contract or strategy is in-, out- or at-the money Expiry the amount of time left on the option Liquidity how often a given option trades Risk measured by calculations known as the Greeks. The Basic view measures time decay (for buyers) and a contract s sensitivity to changes in the underlying price (for sellers). Basic view starts you with certain pre-set filters; all filters are adjustable. To narrow the search universe, you may also specify a stock group (for example, All USA, S&P 500 stocks, NASDAQ 100 stocks, etcetera). Cost Investors can measure an option s cost in many ways from the as-is option price, to more complex measurements based on specific pricing models. The Basic view utilizes the most popular cost measure, implied volatility. The Scanner s calculation of cost uses implied volatility to find option contracts that may be expensive or cheap relative to their peers. Because option prices tend to rise with

3 Page 3 of 14 higher implied volatility, the Cost field can help you find options with higher premiums in relation to the underlying securities price. The Options Scanner defines the following Cost levels: Cheap - Implied volatility below 25 % Normal - Implied volatility between 25 % and 55 % Expensive - Implied volatility greater than 55 % Note: deep out-of-the-money options often have large implied volatility values, even though their prices per contract can run as low as $0.05. That s why the Scanner considers these contracts expensive. Moneyness Moneyness refers to how near the option strike is to the current underlying price. You re probably familiar with these terms already: an option that is at-the-money, for example, has a strike price equal to the current underlying price. On the Options Scanner, at-the-money (ATM) options have a Moneyness value of zero. If exercised, an in-the-money (ITM) option allow the holder to buy or sell the underlying for a better price than the market one. In-the-money options have a positive Moneyness value. Out-of-the-money (OTM) options offer no reason for the holder to exercise at the moment, because the market price of the underlying is better than the strike. Out-of-themoney options have a negative Moneyness value. Because Moneyness depends on the underlying price, it fluctuates often over time. The Options Scanner defines Moneyness as follows: Deep OTM - Moneyness below -25 % OTM - Moneyness between -25 % and -10 % ATM - Moneyness between -10 % and +10 % ITM - Moneyness between +10 % and +25 % Deep ITM - Moneyness above +25 % Moneyness values in the Options Scanner are calculated as follows: Calls: 100 % x (Underlying Price - Strike Price) / Underlying Price Puts: 100 % x (Strike Price - Underlying Price) / Underlying Price

4 Page 4 of 14 At-the-money options actually have Moneyness range of plus- or minus-10%. Exact matches of strike and underlying prices are rare and usually temporary; this range makes it easier for you to find options contracts on the cusp of at-the-money. Expiry The Option Scanner defines expiry, or expiration time-frames, as follows: Short Term two-three nearest months Mid Term - two-three months to half a year until expiry Long Term more than half a year until expiry Liquidity Liquidity refers to how quickly a trader can buy or sell a contract without causing a significant price movement. A liquid market is one with ready, active buyers and sellers at all times. Mathematically speaking, liquidity refers to the probability that the next trade is executed at a price equal to the last one. The Options Scanner defines Liquidity as follows: Low end-of-day option contract volume less than 50 contracts Moderate end-of-day option contract volume between 50 and 500 contracts High end-of-day option contract volume above 500 contracts Risk Options traders measure risk using a set of calculations known as the Greeks, the sensitivities of option prices to different factors. The Basic view of the Options Scanner defines Risk based on what you input for Cost. If you re searching for cheap options, the Scanner assumes you re a likely buyer; for expensive options, it assumes you re a seller. If buying an option - the Risk is Theta, option price decay over time. Risk levels are defined by Theta as follows: Low - option price loses less than 1 % for a 1 day passed Moderate - option price loses less than 5 % daily High - option price loses more than 5 % daily

5 Page 5 of 14 If selling an option - the Risk is Gamma, a contract s sensitivity to larger changes in the underlying price. Gamma is derived from Delta, perhaps the most well-known Greek. Delta measures a contract s sensitivity to more minor changes in the underlying price. Low - option price gains less than 0.25 % for a 1 % move in underlying price Moderate - option price gains less than 5 % for a 1 % move in underlying High - option price gains more than 5 % for a 1 % move in underlying If you don t specify a cost - the Risk is Vega, a contract s sensitivity to implied volatility, in other words, to mis-pricing. Low - option price changes less than 1% for a 1% absolute change in implied volatility Moderate - option price changes less than 10% for a 1% change in implied volatility High - option price changes more than 10% for a 1% change in implied volatility The Risk field measures a main risk factor, but you should also watch Cost and Liquidity to control your overall risk. Low liquidity heightens your risk, as does high cost (as measured by high implied volatility).

6 Page 6 of 14 Advanced View The Advanced view gives you total search control in a very simple interface. Not only can you select many advanced filters, you can also modify each to meet very exact criteria, if you choose. You can fine-tune a search begun with the Basic view, simply by checking the box in Basic labeled Auto-apply changes to the Advanced View. Underlying Filters (Stock) A full list of stock filters with available modifiers is presented below. Intra-day variables are marked in bold. Filter Modifier Formula / comment underlying price, Stock Underlying Price % from yesterday Stock / Stock(yesterday) (Stock - Stock(1yr min))/(stock(1yr max) - Stock(1yr in 1 year range min)) EoD Underlying Volume underlying close volume, V % of 1 mo. average V / avg(v), last month average EoD Options Volume total close options volume, OV

7 Page 7 of 14 % of 1 mo. avg OV / avg(ov), last month average EoD Options Open Interest (OI) total close options open interest, OI % of 1 mo. avg OI / avg(oi), last month average total close (calls volume) / (puts volume), CP EoD C/P volume ratio % of 1 mo. avg CP / avg(cp), last month average C/P volume ratio EoD Historical Volatility Total calls volume / Total puts volume % of 1 mo avg CP / avg(cp), last month average HV for 20 trading days (1 month), HV % from yesterday HV / HV(previous close) in 1 year range (HV - HV(1yr min))/(hv(1yr max) - HV(1yr min)) Intraday IV Index for term 30 (1 month), IVX IVX 1mo. IVX 1mo. / IVX 6mo. IVX 1mo. - IVX 6mo. Call / Put IVX 1mo. ratio EoD IV Index % from yesterday Intraday IVX / IVX(previous close) in 1 year range (Intraday IVX - IVX(1yr min))/(ivx(1yr max) - IVX(1yr min)) Ratio of intraday 1mo. IVX to 6mo. IVX Difference of intraday 1mo. IVX and 6mo. IVX Ratio of intraday IVX 1mo. Call to IVX 1mo. Put IV Index for term 30 (1 month), IVX % from yesterday IVX / IVX(previous close) EoD Relative Volatility Examples: in 1 year range (IVX - IVX(1yr min))/(ivx(1yr max) - IVX(1yr min)) IVX / HV 1) Stock price advances more than 5 % from end-of-day value: set Stock price modifier to % from yesterday, From field to ) Stock close volume larger than monthly average by 20 %: set EoD Stock volume modifier to % of 1 m avg, From field to 120.

8 Page 8 of 14 3) EoD IV Index less than 25%: set EoD IV Index modifier to, To field to 25. 4) 1 month IV Index is at least 10% more than 6 month IV index (when looking for Calendar Spread): set IVX 1m - IVX 6m From field to 10. Option filters A full list of options filters with available modifiers is presented below. Intra-day variables are marked in bold. Filter Modifier Formula / comment Type Call / Put Expiry expiration month and year Moneyness, % 1 - K / S for Calls, K / S - 1 for Puts (K = strike) mean of the option contract bid/ask, C Price % from yesterday C / C(yesterday) % of stock C / S, S - intraday stock price

9 Page 9 of 14 Implied volatility Delta Gamma Theta option contract implied vola, IV % from yesterday IV / IV(yesterday) in IVX 1 year range (IV - IVX(1yr min))/(ivx(1yr max) - IVX(1yr min)) option contract absolute value of Delta; non-negative input is expected for both Calls and Puts % of price Delta * S / (100*C) option contract gamma, Gamma % of price Gamma * S 2 / (10000*C) % of delta Gamma * S / (100* Delta) % of price Theta / C option contract premium decay, Theta; non-negative input is expected % of delta Theta * 100 / (S* Delta) Vega % of price Vega / C this option contract vega, Vega % of delta Vega * 100 / (S* Delta) Alpha Volume Bid Size Ask Size Normalized EoD Gamma / Theta; non-negative input is expected Gamma * S 2 / (10000* Theta) option contract volume option contract EoD volume Intraday best bid size (liquidity indicator) Intraday best ask size (liquidity indicator) Examples: 1) Option premium is at least 10 % of the underlying: set Price modifier to % of stock, Level low Boundary ( From field) to 10. 2) Option premium decays less than 2 % daily: set Theta modifier to % of price, Level high boundary ( To field) to 2. 3) Risk of option price decay due to Gamma is not greater than that due to Delta: set Gamma modifier to % of Delta, Level low boundary ( To field) to 100.

10 Page 10 of 14 For the Greeks (Delta, Gamma, Theta, Vega, Alpha), in addition to Level modifier, we introduced % of price and % of delta modifiers. These normalized criteria help you understand percentage change in option price, and to compare the change magnitude with sensitivity to underlying price (Delta). The following increments are implied when using normalized Greeks: Delta, Gamma - 1 % of underlying price Theta - 1 day Vega - 1 % (absolute, like change from 20 % to 21 % in implied vola) Alpha - 1 day for Theta and 1% of underlying for Gamma Keep in mind that all the Greeks can be entered in absolute values. For example, to find puts with delta between and -0.5, simply set Level boundaries range to (50, 75).

11 Page 11 of 14 Scanner usage tips Monitors and Profiles There are two tabs you will see when you initially pull up the scanner, Search Profile and Monitor List. Profiles are collections of search criteria; monitors are simply lists of options contracts. In the Search Profile tabs you will see the icon and in the Monitor List tabs you will see the icon. You can create new search profile tabs by either selecting File / New Search or by simply clicking the icon in the upper left hand corner. New Monitor List tabs can also be created by selecting File / New Monitor or by clicking on the icon. You can edit both monitors and profiles during a single session. You can also re-name and save either for future edits or re-runs. To save a monitor for later use: use the button, or select File / Save List. You can then choose the monitored list s name and where to save the file in your hard drive. Both the list of options and the column headers selected to display your results will be saved automatically. To edit the name of any monitor file on the fly: select the screen you wish to rename, then select Edit / Rename. To update quote data for a monitored list you have saved: use the button, or select File / Load List. Note this does not re-run your original search; it simply refreshes quote data for the list of contracts you saved from an earlier search. To save a profile search for later use: use the button, or select File / Save Profile. You can then choose where to save the file in your hard drive. To run a saved profile for new search results: use the button, or select File / Load Profile. Managing Saved Monitors

12 Page 12 of 14 You can view up to 10 monitors simultaneously. Each monitor can display up to 1200 options contracts, for a simultaneous total across all monitors of 3000 different option contracts. To start or stop automatic search update: use the stop/play buttons ( / ), or select Run / Stop or Play. Otherwise the Scanner updates the data in search results periodically. View your monitors in a separate window: use the Separated Window. button, or select View / In To see all your monitors in one screen: use the Main Window. button, or select View / Back to Searching tips To fine-tune a search begun with the Basic view: check the box in Basic labeled Auto-apply changes to the Advanced View. Your Basic criteria will be automatically loaded in the Advanced view. To exclude inactive contracts from searches: either check Ignore zero bid options at bottom of Advanced view, or enter a value to exclude stale quotes. The Scanner runs on 20-minute delayed data, so the freshest possible quote will be at least 20 minutes old. To edit columns in search results: Drag-and-drop a column name into a new location in the big right-hand panel Check or uncheck a column name. Checked columns are displayed at right, unchecked are not.

13 Page 13 of 14 Keep in mind: column names in bold are updated in real-time. To check a quote s freshness: use the Quote Time Indicator column. Green means the quote is less than 40 minutes old, yellow indicates quotes from the last minutes. All older quotes are marked as red. To delete a contract from results: use the Delete column, or select Edit / Delete. To save a list of results for later use: use the button, or select File / Save List. (Lists are also known as Monitors.) You can then choose where to save the file in your hard drive. To re-load a previously saved list: use the buttons, or select File / Load List. To add contracts to an existing list: check stock or option symbol in the Monitor tab, then click the add button. While implied volatility represents the consensus of the marketplace as to the future level of stock price volatility, there is no guarantee that this forecast will be correct. IMPORTANT: The projections or other information generated by TradeKing s tools regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. The above calculations do not take into consideration all costs, such as commissions and margin interest which may impact the results shown. It is the user s sole responsibility to select the criteria to enter in the TradeKing s tools, or to choose among the pre-defined screens, and to evaluate the merits and risks associated with the use of the tools before making any investment decisions. TradeKing is not responsible for any losses that occur from such investment decisions.

14 Page 14 of 14 All information is provided on an "as is," "as available" basis without warranty of any kind, and neither TradeKing nor its Service and Information Providers make any representations as to the suitability of the information for any purpose, nor to its accuracy, timeliness, completeness or usefulness. Use of the service is at the user s own risk. TradeKing reserves the right, in its sole discretion and without any obligation, to modify, improve, discontinue or correct any errors or omissions in any portion of the site at any times. Your continued use of this service indicates your acceptance of the terms of our disclosures. Please note - this is sample data provided for demonstration purposes only. Stock or options symbols are for illustrative purposes only and do not imply a recommendation to buy or sell the security. TradeKing does not provide investment recommendations or financial advice.