*Last edited 08/15/2013.
Below is the 08/15/2013 initial screen of Put stock options to sell sorted by Margin Return. All the options below expire 09/20/2013 and have strike prices 20% or slightly less than the Last Price. The next step after this initial screen is live trading. In the live trading settings there are user settings where the list can be further limited by earnings date, return on margin and Spread Ratio.
Early demo of incomplete Options program showing initial scan and then scan results connected to live data.
Example of Selling Options: CMG’s last price is 250.32. The program has found a put option expiring 20 days from today with a strike price less than 20% of 250.32 which is a strike price is 200. The bid price is .30. The Program has calculated the required margin per option for me (based on IB’s margin calculations) which I see is 2030. The 20 day return I get if the stock price does not drop 20% in 20 days and I don’t’ get stopped out is 1.48%. So in that case I would keep 30 U.S. dollars per option and reinvest that 30 U.S. dollars per option as soon as the option expires. (Kindle books from amazon.com are available that cover selling options, just search “selling options”)
Overview: The program’s intended purpose is to automate the process of selling “out of the money” stock options given a user’s target strike price. In the case of selling stock options the target out of the money strike price would be a user determined % below the stocks current price. A stock screener is in place to obtain an initial list of stocks that have options. The initial screen for stocks can be narrowed by typical parameters such as PE ratio and price range. Next additional data for each symbol is retrieved including: option data for each stock obtained during the initial stock screen, earnings dates, dividend yield, open interest for target strike price. In addition the margin required for each possible trade is calculated and the return on margin. the return on margin will determine the return you will achieve if the option expires out of the money (and any stop order is not hit). All of this data can be used to narrow the list of options to be traded.
Once this initial data is retrieved, the next step is to connect the narrowed list with Interactive Brokers via the API. Live data is retrieved. The user can change a large number of settings to ensure that only orders that match their exact criteria are sent. Required margin and return on margin are then updated on each price change.
User can set the minimum and maximum returns for an order to be sent. For example if the return on margin is too high, it might indicate too much risk so perhaps the user would like to avoid certain options beyond some threshold. Settings are in place to control what percent of an account’s net liquidation value can be used by the program to sell options. The program will obtain both net liquidation and available cash and send orders until either available cash is depleted (a cash cushion is also configurable by the user to avoid margin calls) or the maximum % or net liquidation is hit, whichever occurs first.
If the user chooses, stop orders can be sent along with each entry order. The orders are attached to the entry order and only active if the entry order is filled. The user can choose the stop order as a % of live option price.
The maximum number of trades per day can be set. The main purpose is to avoid pattern day trader status which can occur in the unusual case that multiple stop orders are hit the same day a position is opened. This setting is configurable by the user.
Once orders are open, the positions can be monitored within the program. On a chart the user will see each position, the current account value and the value at expiration displayed.
When the program is complete a Buy Now/Paypal payment link will be here and the initial version will be available.