OpScan works by "formulas" which query our database to find trading opportunities.  Current market data is based on a delayed data feed (15-20 minutes delayed).  With OpScan you can quickly run the available scans to uncover hidden market opportunities and trade ideas.  Choose a built-in OpScan formula from the drop-down menu and click "Go".  OpScan automatically runs your selected scan and displays the results.

The information displayed on the reports is a combination of current and historical data.  As the disclaimer states, you should be aware that current data (such as prices) is from a data feed that is delayed 15-30 minutes.  The disclaimer also mentions not to make investments based solely on these reports.  That is because OpScan reports should only be used as a starting point in the process of finding trading opportunities.  You should always do your research and due diligence before you actually place any trade.

There are a number of OpScan reports currently available, with more being developed that will be added over time.  I will briefly go over each report, discuss how it is constructed, and then provide a detailed explanation of what the report is looking for.

Fat Calls on Trending Stocks
This report produces a list of individual call options that might be used in a covered call strategy.  The results are sorted by yield (calculated as the Bid price/Stock Price) with the highest yielding calls at the top.

The first step towards producing this list is to decide what stocks would be good potential candidates for the covered call strategy.  This report only includes stocks trading at a price greater than $5.00.  That group of stocks is reduced further with a filter for liquidity: Only stocks that traded at least $10,000 in options per day, on average, over the past ten days are included.  We also remove any stocks that have an average implied volatility (IV) greater than 100%.

The final step in filtering the stocks is to look for those that are trending.  In this report we include only stocks whose last traded price is at least 3% greater than the average stock price over the past 20 trading days

Now that we have our list of stocks, we look for what call options might be the best to sell.  This report only contains out-of-the-money (OTM) calls, with OTM defined as a strike price at least 1% greater than the current price of the stock.  In an effort to put time decay in our favor, we only chose to include options that have 45 days or less until expiration.

In an effort to include only high-yielding call options, we make sure that the Bid price the price we would be selling the option for) divided by the current stock price is at least 5%.  The final check we make before displaying the results is that the current Bid price is less than three times the option’s fair value.

Stocks Experiencing IV Spikes
This report simply returns a list of stocks whose average IV is greater than 100%.  Remember that we excluded these stocks from the previous report looking for fat call premium.  The report only includes stocks trading at a price greater than $5.00 and only includes stocks that traded at least $10,000 in options per day, on average, over the past ten days.  The final results are sorted according to IV.  Stocks with the highest IV are at the top of the report.

Stocks Experiencing IV Spikes
This report returns a list of stock where the average IV of the options increased significantly compared to the previous trading day.  The report only includes stocks trading at a price greater than $5.00 and only includes stocks that traded at least $10,000 in options per day, on average, over the past ten days.  The final results are sorted according to the percentage increase in IV.  Stocks with the largest percentage jump in IV are at the top of the report.

Futures Volatility Report
This is the only Futures report available in the free OpScan tool.  It is a straightforward report that includes all optionable futures-based assets.  The results are listed by the dollar volume of option traded, on average, over the past ten trading days.  The most active (liquid) are listed at the top of the results.

Stocks Experiencing IV Spikes
This report returns a list of stock where the average IV of the options increased significantly compared to the previous trading day.  This report only includes stocks trading at a price greater than $5.00.  That group of stocks is reduced further with a filter for liquidity: Only stocks that traded at least $10,000 in options per day, on average, over the past ten days are included.  The final results are sorted according to the percentage increase in IV.  Stocks with the largest percentage jump in IV are at the top of the report.

Stock Volatility Report
This report includes all stocks trading at a price greater than $5.00.  The results are then sorted by dollar volume of options traded, on average, over the past ten trading days.  The highest volume stocks (those with the most liquid option markets) are at the top.

So why is it called the stock volatility report?  It is because of the information that is displayed.  For each stock the report shows the current IV, the highest IV in the past 500 trading days, the lowest IV in the past 500 trading days, the current SV (statistical volatility, which is the actual volatility of the stock itself), the highest SV in the past 500 trading days, and the lowest SV in the past 500 trading days.

The free version of OpScan available on DiscoverOptions.com is not as powerful or as customizable as the version found in the OptionVue 6 software, but it is still a useful tool for finding potential trading opportunities.  For an example of how it might be used, make sure you read Len Yates’ article Selling High Volatility, which is in this same issue of the DiscoverOptions Newsletter.