In this post, we will give an overview of FDscanner’s option scanner functionalities and demonstrate 2 useful scans, such as “Find top 20 companies with highest ATM put premium as percentage of stock price expiring in 45 days”.
In this post, you’ll see me referencing selling put premium quite often because that’s the main strategy I run and use FDscanner for. But I will add use cases for finding long calls/puts and LEAPS.
Head to https://app.fdscanner.com/scanner to follow along our tutorial.
Understanding & Setting Filters (Part 1)
When you land into the scanner page, you are greeted by the filter section with 7 tabs, starting with “Options”. In this tab, with the Option Type filter you can choose to filter by Calls/Puts. Traders looking to sell put premium can instantly remove calls from the checkbox, while others looking to invest long term using LEAPS can remove puts.
Option Price/Strike Price
Next is Option Price/Strike price. This is a percentage metric that computes the midpoint bid/ask compared to strike price. If you sell put premium, this is also your “Yield on collateral” or “Yield on margin” assuming it’s a naked short put.
Say for these 2 options expiring next week,
INTC 50p, midpoint price: $0.50, Option Price/Strike: $0.50/$50 = 1%
AAPL 500p, midpoint price: $7.55, Option Price/Strike: $7.55/$500 = 1.51%
It doesn’t matter what the current stock price is, because only the strike affects the collateral or margin you put up. For premium sellers, you would want to exclude the low end of this metric (such as 0 – 3%) because of low yield on collateral.
In the table showing the filtered options, this metric is named pctOptionStrike.
For people buying LEAPS or long options, keep an eye out for this data column. You might not need to adjust this filter, but you definitely don’t want to overpay for an option. One way you can roughly figure out if you’re overpaying is, for companies like AAPL, try to find another company in the same industry with similar IV, and find an option for that company that’s similarly OTM with the same expiration date. Then compare pctOptionStrike between the two.
You might be surprised at the difference, you could look into Put/Call Skew for the 2 companies to figure out if that’s the cause. But for this post we won’t dive too deeply to why seemingly similar options are priced vastly different.
One of the most important filters you’ll use. Here’s one useful trick. If you’re looking for 30% OTM options, instead of setting the filter range of 30%-31%, set it 25-35%, give it a +-10% buffer. This ensures the closest strike to the ideal 30% is shown. For example on a $11 stock, strikes between $7.15 – $8.25 will be shown, ensuring that both $7.50 and $8 strikes are shown because some stocks have strikes $2.50 apart like LTHM ($5, $7.5, $10), while others have strikes $1 apart like FRO ($7, $8, $9).
If you are looking for ATM options, set 0-10%. Adjust the max range down as necessary.
Filter by implied volatility. Like % OTM, give the IV a +-10% range. I don’t use this filter, preferring to use Option Price/Strike when finding stocks to sell put premium on, but I added it as some of you guys may find it useful.
Last traded price for the option. Do you have a very tight budget of $5 for your weekly FD plays? Set last price from $0 – $0.05 and you have a curated list of plays for $5 or less. Combine this filter with %OTM and option type filter to find “Call options under $20 expiring next week that’s no more than 10% OTM”
2 Useful Option Scans
Options with highest ATM put premium expiring next month
Let’s say you sell monthly puts to collect premium, and always look to maximize yield on collateral. You would want to find companies with the highest ATM put premium. You can set FDscanner with the following filters
- Option Type: Puts
- Option Price/Strike: 10% – 50%
- % OTM: 0% – 10%
- Select Expiration: Oct 16
Here’s the results from FDscanner Pro. Unsurprisingly the list is devoid of blue chip or value companies. There’s companies with questionable ability to survive another year (AAL, AMC), fraud allegations (GSX), TSLA and more.
Most of these stocks will be shunned by normal investors, but at 20% yield on collateral for 6 weeks for AMC and PRTY, might premium sellers be overcompensated for the risk? That’s for you to decide.
Finding reasonable weekly bets
At the time of these screenshots, it’s the end of thursday (Aug 27) and there’s just one trading day to expiry for these options. Here’s a scan for cheap but reasonable weekly bets. Set the following filters
- Option Type: Calls
- Option Price/Strike Price: 0 – 0.5%
- % OTM: 0 – 1%
- Selected Expiry: Expiring this Friday
- Last Price: $0 – $0.25
The key for finding reasonable weekly bets is it must be cheap (Low Option Price/Strike Price), yet be as close ATM as possible (% OTM 0% – 1%).
This screenshot shows the above filters, but limited to calls. There’s a total of 65 options passing the filter. If you have a higher budget for options, increasing the Last Price filter helps, you’ll see higher priced stocks appearing here like NVDA and CSCO.
So this is part 1 of using the option scanner. These few filters are the ones you will use the most, probably on every scan. Hopefully you got something out from this post. We will explore additional filters in part 2.