RT Spread Scanner - new name, enhanced functionality

In this newsletter we are going to describe recent enhancements to our RT Spread Scanner (former RT Strategy Scanner service). We are getting a continuous feedback from our customers and consider your ideas as a basis for service functionality improvement. So if you have any thoughts on how to make our services more useful - feel free to email us your ideas.

What is RT Spread Scanner?

This service is just an enhanced version of the �RT Strategy Scanner� service; we will no longer use this name. The new name reflects a fact that the service can do option spreads (scanning complete options universe for potential trades, show P&L and greeks values, simulate risks etc.) It covers Vertical, Calendar and Diagonal spreads; Strangles and Straddles are also included. As a "free addition" you can do simpler strategies, like naked and covered buys / writes and simple synthetic positions like Conversion and Collar. These can be called "spreads" in some general sense, for example, in Covered Call Write you are getting a "spread" or cushion against downfall in stock price, due to the premium from Call sale. More strategies will be covered soon!

If you are not well acquainted with this service, you might wish to read our previous newsletter on the subject. One important thing about this service is that in addition to this RT Spread Scanner you get access to all IVolatility scanners that can be used to scan for specific option strategy � you get access to the Options Scanner Suite.

Service enhancements

There are two of them - advanced stock filtering and advanced option filtering. On the picture below, you see two additional buttons, absent in the previous version:

Now you can do more flexible and sophisticated filtering ("Edit filters") and allow keeping interface still friendly enough ("Hide inactive filters"). When you press "Edit filters" button, a new window will open:

All these advanced stock settings and filters (and advanced option filters too) will be described below.

Advanced stock-level filtering

Of course, all the new functionality is explained in our updated User Guide (Adobe PDF file), but we are going to dwell on a couple of salient points right here on the spot.

Let's consider specific strategy, Long Calendar Spread with ATM options with 1 and 6 months to the expiry. Here the evident "short term" and "long term" are 1 month and 6 month, however they can be different for some other strategy. So, the settings at the bottom of the screen above are ideally configured for our strategy, 30/180 calendar days for IV Index and 20/120 trading days for HV (which are closest to 30/180 IVX calendar days). We will use Calls in our strategy, so select "Call" in "IVX to use" combobox. We'll also set filtering by "IVX_S - IVX_L %" (a difference between short term and long term IV Index) and same for HV; this is the place where long term / short term data is used:

If you press "Apply" and look into main window, you'll see that the selected filters have been added to Stocks filters group:

We've set these values as follows, as you can see:

  • Long term HV is less than short term by at least 5% (stock behavior becomes quieter)
  • Short term IVIndex is more than long term IVIndex by at least 5% (sold options are more expensive)

At the moment (Feb 14 close), such a sample filtering returns only one possible candidate, Mar / Sep 06 BIVN:NASDAQ 7.5 Call spread. You may relax some filters to get a wider set of candidates.

We've used only 2 from 13 advanced stock filters in this example, you can read more about these filters (price, capitalization, volume, total options volume, Call/Put volume ratio etc.) in the User Guide . Feel free to email us with your suggestions on the filters that you think we should add to the scanner.

Advanced option-level filtering

Same advanced filtering stuff is available in the Options filters group as well:

Press "Edit filters" button and check out 11 new option-level filters for each option leg of the strategy:

You can set filters by option price, IV, their changes from close, greeks, volume as a % of open interest and bid/ask spread as a % of stock. The filters are intuitively clear, except maybe a couple. Large readings of option contract Volume as a % of (end of day) open interest can be used as an indicator of unusual trading activity in this contract, which is definitely worth attention. The other filter, option bid/ask spread as a % of the stock price, is a liquidity measure. A bid/ask spread of $2 is OK for some indexes worth above $1000, but is quite suspicious for under $5 stock.

To sum it up

Now you can fine-tune your RT Spread Scanner searches to a very high degree of flexibility. Feel free to email us your comments and suggestions. As usually, you can try the Options Scanner Suite package, which includes RT Spread Scanner, for free for two weeks.