A good Covered Call Screener can make all the difference. If you're a serious covered call trader then it's important you invest in the right tools in order to maximise your profits. All professionals have tools to make their job easier, save time and make better decisions. Some tools are free while others cost money, so it becomes a business decision whether money spent will bring a better return.
Here, we are going to review the features of some of the most popular covered call screeners around today. But first, we need to highlight the essential ingredients you need in a covered call screener to minimize risk and maximise return for our potential positions. Ideally, you need a tool that will help identify . . .
1. A stock whose price action is likely to either remain neutral by expiration date, or go up.
2. Call options on these stocks which have a higher 'implied volatility' or 'time value' as the case may be - or at least one that is above the historical volatility of the underlying asset.
3. General stock price reliability - you don't want something unpredictably volatile like a drug company subject to FDA approval or otherwise on major product lines.
- What your return will be if you close out now, as opposed to staying in until expiration date?
- Should you 'roll out' your sold positions for another month if the stock is going against you, or 'roll down' to a lower strike price and if so, what will your net result be?
- What is your breakeven price? Is it better to sell 'in the money' or 'out of the money' call options over your stocks and what are the risks and returns for each decision?
- Is your portfolio diverse enough to absorb unexpected bad news? One that will automatically factor in standard broker rates to all the above calculations would also be nice.
One of the best market screening services I have seen around is the MarketClub Smartscan feature included as part of their standard membership. It will scan over 230,000 securities to locate opportunities ripe for whatever option trading strategy you have in mind, including Covered Calls. Not only that, but you can then filter the results according to their proprietary ranking system, to deliver only the most promising opportunties. Best part is, that they allow you a no-obligation test drive and receive full membership for only $8.95 for the first month. If you're not 'sold' after that, I'll be most surprised. The standard monthly membership fee is most reasonable for what you receive. If you want to know more about them, there is a MarketClub Review here.
The Free Version
If you hold an account with OptionsXpress, they provide a free covered call screener as part of their service. It is actually a very good one, from the "searching for qualifying stocks" point of view - and you have the choice of a number of paramaters you can enter, including minimum open interest, time to expiry, volume traded, market capitalization and required percentage return. It will search all the optionable stocks on the USA exchanges and report in concise format, which you can sort by the parameter of your choice.
OptionsXpress also has other tools which allow you to search for chart patterns such as channels, triangle breakouts. It also has a basic trade calculator. Overall, OptionsXpress covered call screener is excellent for finding potential stocks to write call options over.
But beyond this, there is not much in the way of detailed ongoing analysis for decision making purposes. For this you need a more advanced tool.
The Covered Call Calculator
This is a covered call screener developed by Fred Thompson for the purpose of assisting the professional to monitor existing positions and make intelligent business decisions. It is an Excel spreadsheet which pretty much does all the things described above for the calculator (part 4) including linking to automatic stock price updates via the internet and performing decision related analysis of existing positions from there, including warnings and roll out / roll down analysis for unfavourable conditions.
You can purchase it for a 'once only' price of $US24.95.
Another "paid" alternative is a covered call screener which scans the market and provides about 20 potential alternatives for around $US35 per month. You can sign up for a free trial at www.optionmonitor.com. It comes with a portfolio tracker which helps you manage and make informed decisions about your various positions. For the monthly fee you would want to receive something more than the free service at OptionsXpress provides. It does appear to have an impressive array of features.
This is another piece of downloadable interesting software available from CoveredCalls.com. They will let you download a 'demo version' for free. Once you pay the $US59.95 for the full version, a number of essential features will become unlocked, including the ability to save your work. As part of the input data, it will ask you your current age and, based on other data you input, together with certain return assumptions, calculate how much money you'll have in one, two, three, five, ten years and at age 65 for retirement.
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