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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What screener to use?

My personal favorite is one that was created by Dr. Stephen Cooper
Using the Investors Business Daily (IBD) and a few key criteria to choose which stocks are doing fundamentally very well.

Currently I use the Options Xpress screener and I will go into detail on how I use it in a future post.

Here is a list of screeners available on the internet - by no means is it a complete list just some of the more popular ones. Most of the have pre-screens which are screens that are very popular and used by a lot of traders and investors to pick stocks.

Stock Charts
Yahoo Screener
MSN Money

and of course Big Charts under the Big Reports link.

These are just the most popular free ones. There are many more paid for screeners but I will warn you that many of them that proclaim to be the little black box screener will work for only certain market conditions and then they fail. I stick with the free screeners and learn how to use them.

More on this later.

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Creating a Watchlist

I have said this before but the first step in creating a watchlist is to have a stock screener - reason? Too many stocks about 13,000 or so of which about 2500 are optionable to know which is the best you need a way to sort them.

So how do we sort out the best optionable stocks? With a screener.

And another important question is why create a watchlist anyway? Because just because you have a good stock to trade from a screener does not mean it is the right time to trade it. Each stock has its own characteristics and its own patterns daily, weekly, monthly and you need to “watch” the stock to discover those patterns and to choose the correct time to get into a trade.

So the first step is to pick a screener and then what criteria to use for a screener to pick the correct stocks.

Well let me say that it really does not matter exactly what criteria you use to pick stocks as much as it does to watch the stock to know how it trades. Watching the stock is much more important. So you could just choose what your stock broker recommends or what your neighbor recommends or what CNBC is recommending BUT do not follow the recommendation. Watch the stock first - get a feel for how it trades it may take a few weeks to get the feel for that individual stock. Do not get caught up in the hype, even if it gets away from you several things can happen that will allow you to trade 1. The stock will come back or 2. it will give you another signal or 3. another better trade will come along. Stick to watching the stocks. Even ones that you have placed through an intense fundamental analysis screener, still watch the stock for a few weeks to trade it. You will be much happier with a watchlist and checking the watchlist daily than just going on recommendations or a screener alone, you will be much more successful.

Screeners - tomorrow!

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