Saturday, November 6, 2010 EST

With five days until expiration we used the Expert Option Search to find short term naked put trades with the goal of earning option income without assignment.

Before we continue let us review some terms used in the Expert Option Search.

  • Downside Protection: DSP is defined as how far a stock would have to fall before the option position was underwater.
  • Return on Investment: ROI is the expected return based on the monies invested in the covered call or naked put trade.
  • Probability of Assignment: POA represents the likelihood that an option seller will be assigned the stock (or have the stock called away) when the option expires. The goal with short term naked put trade as discussed here is to sell options that will expire worthless so the lower the POA the better.
  • Out of The Money: OTM is a common term that means how far the strike price is away from the stock price.

The settings we used for this search were Option Expiration Date of 11/12/2010, stock price of $1 to $50 a share, and a return of investment (ROI) of at least 1%. 

 It may seem that looking for a 1% gain is low but consider we are attempting to gain 1% on monies invested for 5 trading days.

Monday, November 1, 2010 EST

The Covered Call and Cash Secured Put Search is a powerful tool for option sellers. If you are looking to generate income from selling puts or covered callls on high quality stocks our Option Search Engine will help you find it.

Each day at the close of the market we update our option search database with over 2,750 stocks and over 100,000 options.  With the use of our advanced screening/search tools you can narrow your search for profitable income trades in seconds. 

In order for an option to make it to our search database it must have at least 1/2% return on investment (ROI) or greater. Why start at 1/2%? These options can make for great trades one week prior to expiration. You will find many options that have a ROI of 5,10, even 15% or more.  Typically options with a higher ROI and near term expiration present additional risk.  This is why features such as Probability Of Assignment and Downside Protection can help option writers take on profitable trades and filter out trades that present more risk.  

Expert Option Search: This search feature was designed for the serious option writer. With many powerful search features the Expert Search is tool that can be used to prospect for option profits. You do the searching, analyze the results, and make the call.

Option Types:
Search for Covered Calls or Cash Secured Puts

Expiration Date: Search one or all expiration dates

Stock Symbols: Filter your search down to a group of stock symbols or leave this area blank and search over 1700 stocks!

Probability of Assignment (POA): Low POA options can be good choices for selling puts for income where you do not want to take assignment.

Out of The Money (OTM): Search for covered calls or Cash Secured put trades 1,2, 10% or more out of the money. The goal of this feature is to generate income and not take assignment on Cash Secured Puts or have your stocks called away for covered call trades.

Downside Protection (DSP): This feature is best applied to Cash Secured Puts. Searching for Cash Secured Puts (example) with 15% downside protection means that the underlying stock would have to fall 15% before reaching the risk of assignment or loss

Return on Investment (ROI): When you search for Covered Call or Cash Secured Put Trades you want to sell those options with the highest return on investment.

Market Cap: Filter search criteria by Large, Mid, and Small cap stocks

Sector: Filter by sectors such as Technology, Energy... S&P 500, NASDAQ 100 and more

Stock Price: Select a range of stock prices. Example: If you only want to sell Cash Secured puts on stocks trading under $15 dollar use this feature.

Profit/Earning Ratio (P/E): Great feature to limit option choices to stocks that are valued to fit your comfort level. If you are a covered call value investor look for stocks trading between 5 and 18 P/E ratio. If you want growth set the values higher.

Dividend Yield: Many covered call investors like to purchase stocks with big yields then sell covered calls on those stocks to make additional income. Search for ranges in Dividend Yield can assist you in finding those stocks.

Watchlist: Click on the Plus Icon to add options to your personal watchlist.

Click here to for a list of all the features and screen shots for both the Expert and Express option search.

 
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