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MTR Investors Group goal is to provide the best Covered / Naked, Credit Spread, and Iron Condor Option Screeer on the web. Screen over 3,100 stocks and over 270,000 options in seconds to find the best possible trades! Option writers use our screener to find options trades that have the highest... More
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  • Option Credit Spread Screener / Writing Credit Spreads

    This article is an overview of our Credit Spread Screener.

    Trading Credit Spread is a good alternative to trading Naked Puts. The advantage of Credit Spread trades is that you know your MAX Possible Gain and Possible Loss.

    Look to trade Credit Spreads options 16-60 days until expiration. Option premium decays faster when expiration is less than 60 days until expiration. (A more commonly discussed number is less than 56 days.)

    To establish a (vertical) credit spread you SELL an OTM put and BUY a further OTM put (same applies to calls) on the same stock/expiration date. This gives you a net credit on the trade. The MAX Loss of the trade is the difference between the two strikes + the credit you received.

    Based on capital tied up in a trade credit spreads have a higher return on average than a naked position. It is important to keep trading costs low since a credit spread requires two trades. There are discount brokers that charge around 1.50 per contract and may be best to use a discount broker to keep trading costs low.

    After clicking Credit Spread Puts in the Setting Window (as show below) and clicking "Get Options" the results grid will show the results of the screener search.

    I. Put Credit Spread

    The screen shot below shows the results of a Put Credit Spread Search. The results grid shows combinations of the SELL and BUY options to establish the spread.

    (click to enlarge)

    II. Option Chain

    After clicking the Chain Icon from the grid above the Option Chain window will be displayed.

    This is not your Typical Option Chain. What is displayed here are other Credit Spread options for the stock and expiration date selected.

    (click to enlarge)

    Apr 12 3:59 AM | Link | Comment!
  • Screening For Iron Condors

    This is a feature overview of our Iron Condor Screener

    Iron Condors, like Credit Spreads, allow you to know the MAX Possible Gain, and Loss up front before making the trade.

    To establish an Iron Condor you sell a Out of The Money (OTM) PUT Credit Spread and a CALL Credit Spread on the same stock / expiration date. This strategy is typically used for a stock or index that is in a trading range. The goal is to establish both sides of the Iron Condor OTM so that both ends expire worthless and you keep the money.

    Look to trade Iron Condors options 16-60 days until expiration. Option premium decays faster when expiration is less than 60 days until expiration. (A more commonly discussed number is less than 56 days.)

    Based on capital tied up in a trade iron condors have a higher return on average than a naked position. It is important to keep trading costs low since an iron condor requires four trades. There are discount brokers that charge around 1.50 per contract and may be best to use a discount broker to keep trading costs low.

    After clicking Iron Condor in the Setting Window (as show below) and clicking "Get Options" the results grid will show the results of the screener search.

    I. Iron Condor

    The screen shot below shows the results of an Iron Condor Search. The results grid shows combinations of the PUT and CALL options to establish the spread.

    (click to enlarge)

    II. Option Chain

    After clicking the Chain Icon from the grid above the Option Chain window will be displayed.

    This is not your Typical Option Chain. What is displayed here are other Iron Condor options for the stock and expiration date selected.

    Apr 12 3:56 AM | Link | Comment!
  • Trading Weekly Options For Income

    The following article was taken from a MTR Investors Group white paper titled "Selling Near Expiration Puts/Calls for Income."

    Selling Near Expiration Puts/Calls:

    • Capitalize on selling options that lose value rapidly. This allows the option seller to keep the profits when the option expires worthless.

    • Short time horizon in an attempt to avoid any adverse moves in the underlying stock/ETF.

    • Steady flow of income.

    • Suited for traders with short term horizons or income investors.

    • Leverage the "weekend effect" by selling options later in the week. Options lose (on average) 0.6% over the weekend. There have been many articles written on this item over the years.

    Key Success Areas: Please Note: the reminder of this document will focus on Cash Secured Puts (naked puts) and not naked or covered calls. This will help simply the discussion.

    • Commissions: Trading options can be costly. Near term expiration option trades may have less than 3% return, many times the return is closer to 1%. If your broker charges fees such as $12 minimum on option trades this strategy will be less profitable or difficult to make a profit. We recommend you take a look at brokers such as Interactive Brokers (IB). IB has low commissions, fast trade execution, and cover all markets.

    • Market Environment: Selling puts is best when the market is in an uptrend. Selling naked calls is best suited in a down trend. Both have risks. Use our Stock Market Scout to determine market trend.

    • Stock Selection:

    • Stocks in an uptrend, or flat, and above key support areas (see later for an example)

    • Avoid earnings announcements dates

    • Start the selection process using our Expert Option Search

    • Option Selection: Using our Expert Option Search engine to select options (sample criteria)

    • Expire in one to three weeks (best to keep the range under two weeks).

    • Have a low Probability of Assignment (POA). This helps to put the odds in your favor that the option will expire worthless.

    • No earnings period during the option selling window

    • Watch out for extremely high return on investment (ROI). This means the underlying stock is very risky and reduces the odds of the option expiring worthless.

    • Select options that are far out of the money (OTM). This is indicated by the "Moneyness" feature in the scanner. The further negative the OTM value the better. For example if a an option is 15% OTM it means the stock would have to drop 15% before you would be assign on the put and take a loss.

    • Sell options later in the week. Historical evidence reports that on average options lose 0.6% over a weekend. Take advantage of the loss of value by selling options later in the week.

    • Select high Downside Protection (DSP). Example: If DSP is 20% it means the stock would have to drop 20% before you are assigned and take a loss.

    Option Selection: Note: This documentation was made without knowing the results of the example discussed below. Please read the disclaimer in this document. This is not a recommendation to buy or sell any security. This is for informational purposes only.

    Search Settings: Set the expiration dates for options that expire in the next two weeks. The sooner the expiration typically the better. Some key selection criteria listed below.

    • Expiration Dates: Select near term expiration dates.

    • Probability of Assignment (POA): The probability you will be assigned the stock. Select the lower the better to increase the odds of the option expiring worthless and not being assigned the stock.

    • Moneyness: This is an indication of how far away the option strike price is from the stock price. For example if the moneyness is -10% (negative 10%) it means the stock would have to fall 10% before you took assignment and a loss.

    • Other Features: Other items such as downside protection (DSP) and Return on Investment (ROI) can be used to limit results. Mouse over any "?" on the page below for help information.

    (click to enlarge)Expert Option Screener Settings

    Search Results: We will focus on the 5/10 expiration (1 week from the date of this writing). Click on the drop down icon on the date filter and select 5/10. Then sort by Moneyness High to Low.

    (click to enlarge)Searching for Naked Put Trades

    For example, looking out two weeks, the first group of options are selling 52% out of the money with a 2% ROI for two weeks.

    (click to enlarge)

    In this example we randomly selected Facebook. For no other reason than people know the name.

    (click to enlarge)

    Option Return/Trading: We will take a look at the PUT option at the $23.50 strike price.

    • It 14.3% out of the money, has a 1% ROI, and POA is at 9%. Indications show that the odds favor the option will expire worthless.

    • The bid is .15 cents ($15.00) this means a gain of $15 per option sold.

    • If you sold three options this would be a potential gain of $45 for two weeks.

    • You need $6,900 in reverse to sell 3 puts. (Strike Price * 300 Shares) 23 * 300 = $6900. This amount is held in "reserve" in your account until the options expire worthless, you are put the stock, or close out the trade.

    • $45 may not sound like much but… Let's say you made 4 trades a month, 48 trades a year and in a perfect world they all worked out (remember there is no guarantee in the markets) this would amount to $2,160 year. Based on using $6,900 as leverage in "reserve" the yearly return is 33%.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Feb 07 9:18 PM | Link | Comment!
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