Ran the screen today

OK I ran the screen today after the markets closed.

It kicked back 121 possibilities, lets start weeding out and using this list. Then I will go back and tell you why I have choosen these criteria for the screener, but first lets start using it.

OK the first thing is to kick out all the ‘n/a’ spreads that show up (one of my dislikes with this screener) I mean hell there is 20 just in the first two pages! Waste of space and time.

Next kick out all the ones that have less than a 10% Return of Risk, unless you want less. Most of the time you will be looking for between 10 and 25% any lower than 10% is not worth the risk for my taste and anymore than 25% is usually too risky for doing this type of credit spread. You might as well go for the in the money out of the money credit spread and make better gains for about the same amount or even lower risk. More on that strategy later.

And lastly weed out anything that has the spread less than 5% away from the current stock price and preferably you would like it to be 10% away. For example lets take a look at the first two that came up ANF and ATI - heres a pic of it…

ANF is shown here at 69.59 around 70 so 5% of that would be 3.5 points away to 7 points away for the 10% difference. So obviously even though the first credit spread of 70/75 has a great 56.25% return it is much too close to provide the lowered conservative risk we would like to see in these trades.

ATI is shown here at 88.36 or a 5% change of about 4.5 points so we are looking for a spread that starts at least over 92.5 which would be 95 in this case so the first one (the 90/95 spread) is out.

So with the first two stock choices we would be looking at the middle spread choices. The ANF 75/80 Spread and the ATI 95/100 spread. Realize these are just starting points nothing else. We would then look at the charts of these; do our technical analysis, look for support and resistance, and run them through the probability chart, before we would place a trade. This is just a screener to choose possible candidates and these may not make the grade.

From this screener after removing the unwanteds we have about 25 to choose from and more likely just under 10 that have any real promise of making it through the rest of the critique.

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Using a screener

Using the screener from OptionsXpress (OX) to start a search for Credit Spread trades is relatively simple and once you have the information put into it you can save the screen and check it everyday if you would like with a couple of clicks.

As I said before this is not my favorite screener it has many limitations and I have a few dislikes about it, but it was easy to setup and it is free if you have an account with OX.

So lets get started -

Go to the Toolbox tab on the OX webpage (after you log in to your account) and click on the “screener” link.
This is where you should be…

(click on it for full size version)

OK next click on “Spreads” in the screener tabs. We are now going to input the criteria for a list of Bear Call Credit Spread with a 5 point interval between strikes that may fit our needs.

OK under Stock Criteria we want -

Price between 50 and 100
Avg Volume 100K to any
P/E from 0 to 20
Historical Volatility 20 to any

Option Criteria we want -

Expiration month - no more than 60 days out
Intrinsic Value - out of the money
Open Interest - 100 to any
Implied Volatility - 30 to any

This is what it should look like so far …

OK next for the Spread Criteria -

Call Spreads
Credit Spreads
Interval Between Strikes - 5

For Field layout Check the following -

Stock Symbol
Stock Last Trade
Option Symbol
Option Last Trade
Spread Description
Action (links to trade,chain and charts)
Natural Bid
Natural Ask
Max. Return
Max. Risk
Return % of Risk
Break Even Point
Break Even %

It should look like this….

This should give you a few trades to look over. We can tweak it a little to gain a couple more trade possibilities or lessen the amount given, depending on what appears. More on that later.

Just remeber this is only a starting point and it certainly is not a substitute for the technical analysis I have discussed or any of the other protocol I have gone through. This is a starting point the use of a screener to start to find stocks when you are first starting out. A way to start a watchlist.

Any Questions?

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Been gone for a couple months

Well if you haven’t noticed I have been gone for the last couple of months, while the markets are continuing to hit all time highs. Here’s why -

Celia Faye born Sunday November 19, 2006

Number four of my children and the only girl. Life will be getting back to normal and I will begin posting on a regular basis again. I have a lot of good information coming as well as the podcast radio show I have been promising.

Tomorrow - using the Screener at Options Xpress to start your search for stocks to trade credit spreads.

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