Options covered call screener
Leverage is the lure, but beware the hazards. It's rough out there. But new strategies are helping many daytraders stay afloat. Anecdotal evidence suggests daytrading may be coming back, in a slightly different form. If you can't beat the market, join it, writes the author of a recent book.
People usually think of covered-call writing as the turtle's route to wealth and glory. And in a market ruled by hares, it's little wonder you don't hear much about it. With covered calls, returns kind of trickle in like the yield on some dull muni bond.
Now there's a new Web site, Optionfind. It functions just like an online stock-screening tool, except it screens for covered-call opportunities that can produce returns on par with a hedge fund -- and probably with a lot less risk.
More on the Web site in a moment.
First -- quick review -- what exactly is a covered call? When you sell a covered call what you're really doing is giving the buyer the right -- but not the obligation -- to purchase shares of stock from you at an agreed-upon price, called the strike price. The buyer believes those shares will increase in value, and for that reason he or she will pay you a premium for the calls. Think of that premium as income. HD, For Example Here's how the whole business works: Before you sell a covered call, you first purchase the underlying stock.
Of course, you can't count all of that as profit. Amounts vary with each online brokerage. To compute the annual return, I'm assuming you sell a new covered call on Home Depot or another stock paying a similar premium about every six weeks.
And, as I mentioned, that annualized return doesn't take compounding into account. Let's say that between now and late February, when the options expire, your Home Depot shares rise to And remember, the money came at a pretty low risk. If Home Depot's shares drop in price, the calls expire worthless. As I said, this is the turtle's way to wealth.
But if you're a fairly savvy investor and you want a low-risk way to build a nest egg, covered calls could be your meal ticket.
In fact, covered-call writing is deemed conservative enough that it's the only options strategy allowed within an IRA and other tax-deferred retirement plans. If you want a more complete explanation of covered calls, read Michael C. Thomsett's book, Getting Started in Options. Besides their limited upside potential, do covered calls have any other drawbacks?
You need to take a fairly large position in the underlying stock -- several hundred or even 1, shares -- otherwise broker fees will eat up your profits. Screening For Opportunities Here's another drawback: Until now, it has been tough to find out which call options paid decent premiums.
The cumbersome way would be to first develop a list of stocks you like, then painstakingly check out their option chains on the CBOE Web site. The site was launched in October by Joshua Oskwarek, president of Productivity Systems , a Connecticut Web development firm. So far, Oskwarek's site gets only about 1, hits a day.
It's a full-fledged options screening program. Just like stock screens at sites such as Stockpoint. Theoretically, this simplified search would call up stocks that are: Relatively cheap to buy in round lots.
Options Trade – Selling Deep In-The-Money Calls | InvestorPlace
Good bets for future gains as indicated by the high earnings per share , meaning call option buyers would likely pay a premium because they would expect more growth in the future.
Liquid enough so that trying to sell your five or 10 calls won't tilt the market.
Interestingly enough, when I input the above variables into Optionfind. Recently recovering from months of decline, the stock has a price-to-earnings ratio of just So yes, if you're a covered-call writer there are potential winners out there.
And it only takes a search engine like Optionfind. If you'd rather not fill in all 27 blanks on Optionfind. Granted, it's the more volatile stocks that provide the higher returns.
Graphics software maker Engineering Animation EAII , for example, definitely has its ups and downs. The stock fell from a high of 63 a year ago when management admitted to discrepancies in its numbers.
Quantcha Covered Call Screener - Quantcha
Slow and steady wins the race. And returns like that are worth coming out of your shell for.
How to buy options - MarketWatch
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