Option Scanner

Last modified 15:51, 5 Nov 2012

optioneticslogo25.gifThis content is provided in support of the Optionetics module for Your SOFTWARE and may not be applicable to your package. For more information, go to the Modules topic of this help.

Option Scanner

The Option Scanner drawing tool allows users to nominate a price level and a date in the future at which they expect an underlying stock to trade, and then to scan for options for a number of different strategies appropriate for that price level and date.

The user first selects a price and date with the drawing tool's cursor.

Your SOFTWARE then considers the current market volatility for the underlying stock and provides a number of option strategies that are appropriate for trades at the user's preferred price and date.

A dialog box displays an array of appropriate strategies. Users then select one of the strategies and an Your SOFTWARE Trade Scan is run searching for options on that stock using the selected strategy.

The Search Results work page shows all the strategies, as well as details of their component options contracts, together with trade metrics for each, in a table ranked in order of profitability.

Select Price and Date

The user selects the Future Price and the Future Date using the cursor:

ogopscnr_selctpircndate.gif

Price Level sets Market Outlook

Whether the user-defined Future Price level is above (bullish), below (bearish) or about the same relative (neutral), relative to the current closing price of the underlying stock, will be one consideration in determining which strategies will be available to scan for options for that stock.

Bullish, Bearish and Neutral strategies are listed depending on where the user clicks relative to the current closing price:

Bullish :

Click at least 5% up from the current price

Bearish :

Click at least 5% down from the current price

Neutral :

Click within +/- 5% of the current price

In the example above, the user is bullish on the underlying stock, and has selected a price well above 5% from the current closing price.

Option Scanner Dialog Box

Once the user right clicks the mouse at the position of the future price/date selected, Your SOFTWARE calculates the Implied Volatility (IV) value for the option contracts. While this takes place the following information dialog will display:

drawtool_optnscnrloadiv.gif

Once the IV data has been loaded, the Option Scanner dialog box will display.

In the example below, the cursor position indicated the user expects the market to be rising (i.e. bullish) and the IV value returned was in the low range. Consequently, a number of Bullish Strategies from which to select are displayed:

drawtool_optnscnrstratlist.png

Click the Settings button to change the parameters and array of strategies used to populate the Option Scanner dialog box.

Strategies Settings

Users can limit the types of Strategies that are considered.

In the Strategies tabbed page of the Option Scanner Settings dialog users can exclude strategies from consideration by un-checking the check boxes for those strategies:

drawtool_optnscnrsetstrats.png

In this way, only strategies that the user is interested in will be considered for inclusion in the Option Scanner results.

Volatility Settings

drawtool_optnscnrsetvoltys.pngThe Volatility also has an influence on which Strategies are displayed to choose from.

A different array of available Strategies will be displayed, depending on the interaction between the market condition (Bullish, Bearish or Neutral) as determined by the user's choice of Future Price and Future Date, and the implied volatility (IV) of the underlying stock as calculated by the software.

In the Volatility tabbed page of the Option Scanner Settings dialog, users can specify the level of volatility considered to be Low and High, and Your SOFTWARE will calculate Neutral level in between the two.

The implied volatility of the underlying stock is calculated automatically by Your SOFTWARE using over 6 months of data.

In the example above, a Bullish Market with High Volatility will have an array of two types of Strategies to scan for.

A Bearish Market with Low or Neutral Volatility will have an entirely different group of Strategies to select to make a scan from.

There are nine possible groups of Strategies.

Nine Arrays of Strategies:

   

1. Bullish Market / High Volatility

4. Bullish Market / Neutral Volatility

7. Bullish Market / Low Volatility

2. Neutral Market / High Volatility

5. Neutral Market / Neutral Volatility

8. Neutral Market / Low Volatility

3. Bearish Market / High Volatility

6. Bearish Market / Neutral Volatility

9. Bearish Market / Low Volatility

Effect of Future Date Selection

While the two tabs in the Option Scanner Settings dialog will effect the strategy types and scan settings, the Future Date selected by the user with the cursor will also have an influence on the scan results returned.

Depending on the strategy and its complexity, the default scan settings will often only return results for limited time-frames from a stated target date.

These default setting vary depending on the strategy, but their effect can be to limit the number of strategies returned in the scan results list to only include contracts within a reasonable time of the date selected.

Select and Run a Scan

Users select one Strategy from the Option Scanner dialog box and single left mouse click to run it.

Strategy Type Indicators

To assist users in their selection, each strategy also has an indicator following its name that identifies the strategy type.

The following types are indicated:

ITM

Strategy is recommended for positions that are In-The-Money

ATM

Strategy is recommended for positions that are At-The-Money

OTM

Strategy is recommended for positions that are Out-of-The-Money

Credit

Strategy will result in a net credit to the user's account

Debit

Strategy will result in a net debit from the user's account

Knowing the strategy type can assist users in their selection.

Trade Scanner Results

The Trade Scanner work page will open with the Search Results tabbed page displayed:

tradscan_results_page.png

In the example above, Long Call strategies were identified as being appropriate for the date and price indicated by the user.

Ranking

The results will be ranked in terms of economic benefit.

Construction

The Construction column provides details of each of the options contracts required to construct the strategy appropriate for the date selected by the user.

In this example, the construction of Long Call strategies is rather simple, each requiring only one options contract. Other strategies can be significantly more complex, in these cases the construction column will contain details of all the component contracts for each strategy.

Current Underlying Price and Cost of Contracts

The table next indicates the current price of the underlying stock, and the current cost of the underlying contracts required to construct the strategy.

As mentioned previously, in this example strategies only require one contract. For strategies with multiple legs, the Cost figure will be the total cost of all the contracts required for the particular strategy in that row of the table.

Max Profit, Risk, Days and other Metrics

The Default View of the Search Results table will also include various economic metrics regarding the strategy.

These useful metrics can be displayed, turned off or moved in table using the custom view tool in the Search Results table's Action menu.

For more information on the Search Results table, and the OptionGear Module's trade scans in general, go to the Introduction to Trade Scans help topic.

Strategy Components and Settings Details

Users interested in each strategy's components, and the trade scan settings used to search for options to make up those strategies, can access the OptionGear Fact Sheet: Option Scanner Tool.

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