Hi folks, Is there a way to scan for "over-priced" or premium rich options? Ones with a lot of Intrinsic value. By overpriced I mean the following: [Option Premimum - (Stock Price - Strike Price)] / Strike Price x 100 This is something that I would like to research and have no idea or preconconception as to what I will find. MM
It all boils down to how you evaluate if an option is overpriced or not. That is: you first need a model. Price the option with your model, compare the theoretical value with the market value. If the market value is higher, short it. If it's lower buy it. Then pray your model is good.
Your formula is meaningless, as it does not account for volatility. An option premium has to be higher when the volatility of the underlying price is higher.
Option Vue is the best option scanner I know of for retail investors, and it is in my opinion very limited. Better off spending your time looking at the chains yourself than running their pointless scanner. I have a feeling that institutionals and professionals hooked up on Reuters data feeds that have their own proprietary quant models and PHDs have something better than Option Vue. Just a hunch. If anybody out their has the ability to record daily options price data into their own databanks on their hard drives to create price charts of derivatives please advise. I would like to see multiple data entries, or multiple contracts added into one price chart over time.
First off, don't confuse "over-priced" options with high priced options. Premium rich just means high volatility. You want more premium, you're likely to get more movement. More reward for more risk. It's not totally clear what your asking. Your formula determines the amount of "extrinsic" premium as a percent of the strike price. But you asked about intrinisc. What are you after? McMillan puts out a weekly list that includes IV. Sort for the high ones and you'll find the premium rich "dogs" http://optionstrategist.com/free/analysis/data/index.html
www.poweropt.com is the most sophisticated options scanner. Scans the entire options market in real-time on any criteria you can think of.
BTUD - I am starting to create models like I have for stocks. Amibroker is a very powerful software for creating trading strategies, scanning, and charting. It has served me well for years. But it is not for options, therefore I need to find something for options. Currently I have been scanning for optionable stocks that match various criteria, then manually looking up options chains, etc. China man - Agreed Option Vue looks very good but is also a little too rich for me. Doesn't it run well over $200/mo? Are you a user of OV? I am a "Monk" and try to go the free (or very low cost route first). Also agree that the big boys have their own custom software for identifying opportunities. spindr0 - I mispoke, meant to type extrinsic. Good catch. Yes I want to find these stocks that have a high % # (premium vs strike price) for research purposes. Thanks for the link to the free lists. just21 - Thanks for the link to poweropt. I will check it out. Also looking at the IVolatility.com's RT scanner for $59/mo. Just to repeat, I am a cheap $%&# so it will be a while before I part with any $. I always try to do a lot of research first and exhaust any and all free resources. Thanks for taking the time to reply everyone, I very much appreciate the responses folks. MM
GoLAX - Thanks I will keep that in mind. Kind of like how I get Trade Ideas for free since I moved money over to Scottrade IRA. Free is good. MM
Tho cost efficient I'm not sure it's time efficient (or even accurate) but you can get free historical quotes at: http://www.crimsonmind.com/options/HistoryData.aspx