Sported Call Screener Reduces 164, 620 Choices to 39

"Covered calls" are our most popular option-based investment strategy. Online broker Charles Schwab says that 84% of their accounts that're approved for option exchanging do covered calls. But so many choices! Considering all of the base Stocks, strike prices, and expiration months available there are 1000's covered call combinations. This article will help you reduce the options and, hopefully, increase your chances for success by using a covered call screener.

Starting runners: 164, 620 (not counting weeklys)

Filter 1: Remove Stocks beneath $5.

Yes, there are some relationship companies that trade for less than $5. One could argue who is going to Citigroup (a $4 Stock) should not be eliminated. But, low-priced Stocks often lead to trouble so we're taking them all out (again, this exercise conveys stacking the odds in your favor).

Remaining candidates: 158, 199

Filter 2: Remove options that are not near-month

When doing buy-writes what your buy Stock specifically for the purpose of writing a call talent against it then you need to focus on near-month business opportunities. Since we are in the early January, in this example i'm able to limit choices to brand new that expire on The month of january 22 (in about 3 weeks).

Remaining candidates: 32, 145

Filter 3: Remove options that have open interest of beneath 2000.

Open interest is a measure of liquidity or even affects the bid-ask spread for that option. If you ever have to make an adjustment to the option you want small spreads, so let's stay away from illiquid options.

Remaining candidates: 2636

Filter 4: Remove Stocks that have earnings releases before option expiration.

Again, when doing buy-writes it only has too many good choices where you don't have to take unnecessary risk. Let's eliminate earnings volatility.

Remaining candidates: 2499

Filter 5: Remove options that have less than 20 cents of your time premium.

Unless you're doing a large number of contracts, you don't want your current commissions to each up a corner of the time transaction received.

Remaining candidates: 1081

Filter 6: Remove Stocks with a market cap less than $500M.

Similar to within the $5 Stock price filtration, we don't want to mess with tiny market cap manufacturers. They can be most possible volatile.

Remaining candidates: 993

Filter 7: Remove leveraged ETFs.

The ETFs (exchange traded funds) that are 2x and 3x leveraged are intended for day trading, not protected calls.

Remaining candidates: 945

Filter 8: Remove buy-writes with an annualized return-if-flat < 12%

You can certainly set a higher house here. I've used 12% to eliminate some of the really low-yielding choices.

Remaining candidates: 845

At this point and begin segment the results based on what you're interested in. The next filter you apply could be moneyness (relationship of Stock price to hit price) or industry industry (healthcare, financials, etc) or P/E ratio or something else you care about.

As an example, if you want buy-writes that're at-the-money (i. e. you have a neutral market outlook), equipped healthcare sector, and have all of the above filters applied, then that we now have only 39 candidates. That is a small enough list so that you can manually scan it start do additional research (check mechanical indicators, analyst ratings, etc).

There are many choices when evaluating covered call investments. But reducing the set of choices anywhere from 164, 620 to 39 is easy or time consuming that a covered call screener.

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