OpScan
Formula Building - "Find
the options that meet your criteria - lightning fast!"
Building
your own OpScan formulas can save you endless amounts of
time
in searching for trades that meet your own personal trading
criteria.
An overview
of the elements of an OpScan formula can be found in the OpScan
tutorial. It is suggested that you become familiar
with the different parts of OpScan formulas prior to building
your own.
OpScan
has a set of specifically defined parameters and operators
that must be used when creating formulas. For your convenience,
feel free to print lists using the links below:
While writing
OpScan formulas, use the "Test Syntax" button
to make sure the formula is being written in the proper
language and
structure that OpScan will understand. A "Formula is
valid"
message will appear when the formula is written in acceptable
terms. If a mistake has been made, "Formula is invalid" will
appear with an explanation describing the deficiency -
the
position of the error identified by a flashing "cursor".
Now let's
proceed to the formula writing!
Writing
the "Pick" line formulae
The "Pick" line
is the most critical element of the OpScan formula as it
defines the criteria of the options for which you are searching.
Writing the formula for the "Pick" line
is much easier when you know precisely what you want to find.
Tip: Try
writing a sentence or two that specifically describes
the criteria for which you wish to search before you attempt
to create the "Pick" line formula.
If you
can explain in simple terms exactly what you wish
to find, transferring the information into a mathematical
formula is much easier. Once the criteria is written down,
you can start breaking down the explanation into sections
and then create a mathematical formula using the OpScan parameters
and operators for the OpScan search engine.
Example: I
want to trade stocks in the price range of $20-$50 dollars.
I am looking for "calendar spread" candidates
which have 15% higher volatility in the near term options
that I will be selling over the longer term options that
I will be buying. To ensure liquidity, I want to make sure
at least $500,000 dollars are being traded in the options
each day.
Now that
we have a written explanation of what we wish to find, we
can start creating the actual mathematical formula by transferring
each sentence into mathematical terms.
Sentence
1: I want to trade stocks in the price range
of $20-$50 dollars.
Mathematical
Formula: LASTU>20 AND LASTU<50
Sentence
2: I am
looking for "calendar spread" candidates
which have 15% higher volatility in the near term options
that I will be selling over the longer term options
that I will be buying.
Mathematical
Formula: IV1>1.15*IV3
Sentence
3: To ensure liquidity, I want to make sure
at least $500,000 dollars are being traded in the options
each day.
Mathematical
Formula: ATVOL$(5)>500
Now that
we have transferred each sentence into mathematical formulae,
we can combine them into one string for the OpScan "Pick" line
formula. We will use a comma followed by a space to seperate
each individual criterion that has been defined. The comma
acts as an "and" for searching purposes which designates
that each subset of criteria must be met before a security
is included in the OpScan report.
Pick
Line Formulae: LASTU>20 AND LASTU<50,
IV1>1.15*IV3, ATVOL$(5)>500
Now wasn't
that easy? By first writing down the description of our search
criteria, it was much easier to transfer the information
into mathematical formulae. Sentences 2 and 3 contain
variables that have been arbitrarily chosen for the purpose
of explanation and could have been written with a slightly
different appeal. In Sentence 2, we could have used IV1 vs.
IV2 or IV2 vs. IV3 however IV1 vs. IV3 was chosen as it identifies
the largest time differential. Sentence 3 contains a variable
between the parenthesis for the number of days used to calculate
the average ATVOL$(n). A 5 day average was
used for explanation purposes; however, "n" allows
for any number between 1-20.
Writing
the "Sort" line formula
The "Sort" line
provides the basis for arranging the output in the OpScan
report. A formula is used and will typically relate to your
search criteria. In the example above we may choose to view
the output in order of the underlying stock price or average
daily dollar volume of options traded. However, since
we are specifically looking for a difference in IV (implied
volatility) between 2 expiration months, that is the basis
that we will use for arranging the output on the OpScan report.
Write a simple sentence explaining how you would like to
view the output before attempting to write the "Sort" line
formula.
Sentence: I
want to sort the output by the actual difference in implied
volatilities between the 2 expiration months.
Mathematical
Formula: IV1-IV3
The
formula will subtract the longer term's IV from the shorter
term's IV and result in the actual difference between the
2 expiration months IVs. The output will then be displayed
with the largest differential at the top of the list
in descending order. Some variations of "Sort" line
formulas can even be written to further filter the output,
if desired.
Identifying
the "Show" Line parameters
Now
that the "Pick" and "Show" line's formulas
have been written, we need to identify the information desired
to be seen for each security. Again, write a simple sentence
first and then replace it with the proper OpScan
parameters.
Sentence:
I want to view the price of the stock, the respective IV's
for each expiration month and the average daily dollar
volume for the last 5 days.
Show
Line Parameters: LASTU, IV1, IV2, IV3, ATVOL$(5)
Simply
insert the appropriate OpScan parameter for each individual
criterion that is desired to be viewed and separate them
with a comma and a space. Let's view our work!
Hover over "Test Syntax" button
to check the validity of our OpScan formula
The
final steps in building an OpScan formula are to identify
the group of securities you wish to search in the "Include" section,
and to specify the maximum number of items you wish to have
included in your report.
That's
it! You have now built your first fully functional OpScan
formula that you can use to search for calendar spread candidates. View
the OpScan report.
You
can transfer the above information into OpScan and run
the report. Try changing the formula slightly and view the
difference that it may make to the output. Try creating new
formulas on your own and, if you need help, feel free to
contact your product consultant for assistance.
If
you are not a current subscriber, fill out the online
subscription form and start using OpScan to help you find the options
that meet your criteria...in a matter of seconds!
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here for a printable version of this page. |