IVolatility.com - data and services usage: Intraday Scanner

Just a couple of weeks ago we started a new series of newsletters dedicated to services available on IVolatility.com. Since then our services suite got an entirely new item � Intraday Options Scanner. We decided to start our in-depth services description with this new service. We believe in growing demand for such services and will make our best to provide both analysis tools and intraday data to our clients.

Intraday Scanner in brief

Intraday Options Scanner can be used to find options contracts that are best suited for your strategy so that you may monitor your selection during the trading session.

To find options contracts matching your criteria you can use:
Basic Scanner - basic and user-friendly, yet powerful, �one click� option finder.
Advanced Scanner - provides complex filtering criteria combined with easy-to-use interface.

Monitor view

allows you to track most important variables of your options pick during the day.

The Scanner is driven by 20-minute delayed data and has the following equities coverage (this list is to be extended):

  • Index options on NDX,DJX,OEX,XLF,DIA,QQQ,SMH,BBH,OIH and SPX
  • Options on all S&P500 constituents

Now let�s look inside.

Basic Scanner

Here you need to select just a few criteria. You define basic parameters, such as underlying symbol (you can leave this field empty if you want to search through all covered equities), expiration and moneyness. You also specify your risk-management preferences by choosing cost, risk and liquidity. We take up the simplest approach to these metrics, e.g, the cost is defined as implied volatility, liquidity as yesterday�s option contract trading volume.

Transition from the Basic Scanner to the Advanced is rather smooth - you can always find out what numeric criteria correspond to verbal definitions of Basic Scanner. Just check the 'Auto-apply changes to the Advanced View' box and click the 'Advanced' tab on your screen. All the settings defined in Basic Scanner will be immediately translated into numbers. Be aware that returning from 'Advanced' to 'Basic' tab always clears this box - to prevent you from accidentally resetting of filters previously defined in Advanced Scanner.

As you can see, the Basic Scanner is just a convenient interface to a more sophisticated Advanced version. It really makes the learning curve less steep and Basic Scanner interface is still quite useful even after you are familiar with the Advanced version.

Advanced Scanner

About 60 different filters for stock and option parameters are available here - both in verbal and numeric forms. At the same time you see no more than twenty filters on the screen simultaneously, which makes defining filtering criteria quite manageable. To concentrate on the filters you actually are going to use just press the 'Hide inactive filters' button - it is that convenient. How did we manage to compress 60 filters into 20? It is easy: for example, filters by 'current option price', 'change from yesterday' and 'percentage of underlying price' are all hidden into 'Price' filter. Almost every filter has a 'modifier', which contains options like 'Absolute' or '% of yesterday'. This limits your freedom a bit (for example you cannot filter by current option price and by change from yesterday simultaneously), but we had to make this sacrifice in favor of usability.

'Mapping' between Basic and Advanced Scanner is quite easy to understand. Expiry, Moneyness and some other parameters are obvious, while variables such as Cost, Liquidity and Risk are a bit complicated. We use the following mapping for these 'sophisticated' parameters:

  • Cost = Implied Volatility
  • Liquidity = End of day option contract trading volume
  • Risk = One of the Greeks, depending on whether you buy or sell the option

If you want to see exact figures just use the 'auto-apply changes' checkbox. The main parameters covered by both Basic and Advanced versions are implied volatility, Greeks and option volume. Advanced version provides more stock-level filters, and extended flexibility in option criteria selection. You can always save your list of criteria so that you do not have to define your filters again every time you're starting the service.

Example of usage

Now let�s consider a real-life Basic Scanner usage example. Default search looks for expensive Calls with short-term maturity and moderate risk level. Such options are a good candidates for a popular Covered Call Writing strategy. So we just select the Basic Scanner view and press the 'Search' button. After market had opened on June 7-th, 2004 the scanner produced this result:

The options contracts displayed are considered expensive since contracts IV is above 55%, and not that risky as contracts price gains no more than 5% for 1% move in the underlying (when you sell the option Gamma is usually considered to be the main risk factor). Note that there are options with bid price of $0.05-0.10 among these expensive contracts. They are sufficiently out of the money and have rather large level of IV. You might want to filter out this class of 'expensive' options - no problem - just switch to the Advanced mode and filter out this option price! We�ll look at the result of such filtering in the next section dedicated to Monitor module.

Monitor

This module serves as the output window for both Basic and Advanced Scanners. It carries valuable independent functionality as well. For example, you can manually delete or add single options from here, as well as a group of options (options of the same maturity or within certain strike range etc.). Indeed, sometimes you do not need the Scanner, when you know what options are to be monitored. Add them to the Monitor view, configure the columns you wish to observe - and here you go! You can save your watchlist anytime as well.

In the example above we�ve deleted all the options with 'nominal' bid prices (activate the 'Delete' checkbox for the option contract you�re not interested in and click �Ctrl-D�). After the market closed our selection of contracts is as follows:

You see that NOVL (Novell Inc., NASDAQ) declined by about 2.4 % from the Open, and Aug 04 strike 10 Call fell in price as well. Not yet sufficient to return your investment, but quite close to it. The other two names advanced quite rapidly, so their Calls gained in price as well. Search with the same criteria would yield about the same result � all those contracts are included as a good candidate for selling. There is still time till expiry, so it is a bit early to count the P&L. Note the drastic implied volatility downfall of the VRTSE Jun 30 Call - a reliable sign that the price will shift in the same direction.

Further info

You can find more information on Intraday Scanner usage in the service guide available for download - http://www.ivolatility.com/doc/IntradayScannerGuide.pdf But we believe that trying the service itself will be even an easier way � judge for yourself using our free 2-week trial!