The options search engine evaluates prospective trades using the provided model. Those trades are then filtered and sorted based on the configured settings.
Observe the list of over 16,000 trades shown for the current model, filters, and sorting. The top trade is a Bull Call Spread followed by two Short Iron Condors.
Trades can be sorted using the Sort By dropdown. There are three ways to sort, but it’s important to understand that all sorting is done relative to the model provided. As a result, search results can change if you change the target price range, commission structure, or pricing strategy (market vs. midpoint).
Change to a different sorting and observe how the results change. Select Average return sorting before moving on to the next step.
The options search engine supports several dozen common and complex option strategies. You can configure them one by one, or scope into a single strategy. For example, you may be looking for a trade using a specific strategy.
Click the Strategies header to expand that section. Due to its length, this section is collapsed by default.
Click the only link next to Covered Call to filter out all trades that are not covered calls.
Unlike the model designer, filter and sorting changes update the trade list immediately.
Observe the updated list of trade results, which is now filtered down to 38 covered calls.
Add secured put trades to the list by checking its box in the strategy filter.
Observe the addition of secured puts to the trade results. They begin at the 4th & 5th results.
Covered calls and secured puts are generally considered to be symmetrical trades. They offer the same payoff diagrams and are often used as swappable strategies. When we filtered down to just covered calls, it made sense that there were 38 trades since there are 38 calls (half of the 76 options). However, something doesn’t add up here since showing both covered calls and secured puts should produce one trade per option, but we’re seeing fewer.
Observe the filtered trade count (74) is less than the number of options (76).
It looks like there are two missing secure put trades. When this happens, it’s usually because of option pricing. One way to dig into the problem is to take a look at the option chain. The tool dropdown in the breadcrumb at the top of the view makes it easy to jump to related tools.
From the Search results dropdown, select Option chain to open the option chain.
Scroll down to the Puts and observe that two strikes (65 and 70) have no bid, which means secure puts cannot be modeled for them.
Use the Option chain dropdown to return to the Search results.
You can use the By option level dropdown to include only trades that match your approved options trading level. While these levels may vary slightly across brokerages, they generally translate to the degree of leverage risk you’re comfortable working with.
You can select option strategies using the By option level dropdown. This includes all strategies at that level, as well as the strategies at levels below it.
From the By option level dropdown, select 3 (spreads). This will include everything except the level 4 strategies., which was the original list of trades.
The I want to use a custom strategy sends you to a long stock trade in the trade analyzer. You can then adjust the legs however you like to model the performance of a trade with any combination of legs.
Select the Strategies header to collapse it. This will make it easier to work with the other filters.
Prospective trades can be filtered based on their expected returns. By default, all filters are set to -100%.
If you have a view with a precise price range, you may only want to see trades that would turn a profit for prices within that range. This is especially useful when evaluating range-bound strategies like condors and butterflies. However, it can be just as helpful for directional views when range-bound strategies are filtered out.
From the Filters section, select 0% from the Minimum return dropdown.
Due to the way these returns work, the average return will always be at or above the minimum return, and the highest potential return will always be at or above the average return. As a result, other sliders may be moved when one is pushed past their current value.
Observe that all minimum returns have been pushed up to 0%.
Observe that the search results now reflect only trades that only produce a profit within the model price range.
You can also use filters to adjust results based on common requirements. For example, when you loaded the original search with a bullish view, the engine set the Exclude range-bound strategies filter to remove trades that would turn a loss if the stock moved too far up. You always have the option of turning this off in order to see those other trades, but by default they would be hidden since bullish views typically don’t want to risk losing money on a trade if the stock surges beyond their expected price target.
The trade results presented in the list all share the same structure with the same general details.
Select Analyze for the first trade result to view it in the trade analyzer.