Take a guess on how many optionable stocks there are…
If you said over 3,779 you are right.
Now guess how many optionable ETFs there are.
Over 1,000 of these too.
That is a whole lot of optionable symbols to go through looking for trades huh?
Guess what?
You would be wasting your time and money by trading 99% of these.
When trading options, I strongly believe that you need a Watchlist.
A list of symbols that you can flip through quickly and easily to identify trading possibilities.
The alternative is to waste countless hours surfing online, reading the WSJ or IBD, watching Cramer every night looking for your next trading idea.
Then when you actually find a stock you like, you have to find out if it is optionable, is liquid enough to trade, is volatile enough to give you enough premium, etc.
And this is all before you even decide on a strategy to use.
When looking for a trade, I go through the charts of all the symbols on my Watchlist. If I find a chart I like, I dig further and investigate strategies.
One of the unexpected benefits of using a Watchlist is the development of a Sixth Sense.
By going through the same charts and watching the same stocks over time, eventually you can predict with uncanny accuracy how a stock will behave.
So how do you know what symbols belong on your Watchlist?
That is the $64,000 question.
Here’s a list of just some of the criteria I look at to create my own Watchlist:
- Optionable (of course there have to be options available to trade)
- Volume – there needs to be enough trading of the options. Most options have pathetic volume.
- Volatility – the symbol needs to have enough volatility so that the options have enough premium (value) to trade them.
- Strikes – there need to be plenty of strikes available to trade so that you can choose between different strategies.
- Tight bid /ask spreads – so the market makers do not eat all your profits
- News – the symbol has to “popular” enough in the financial media to attract attention of new traders or already be popular enough to keep the traders that currently trade it.
Every underlying you trade MUST pass all these tests.
Otherwise:
- You might have a good trade but cannot get out because there is no one willing to get you out at the price you want.
- You might have a great chart pattern but there are to no strikes at the support/resistance levels you want to trade.
- You might have a great stock to sell options on (Calls or Puts) but the premium is so low, that it is not worth your time.
It took me years to create, refine, and perfect my own Watchlist,
And then I have to keep fine-tuning it every year as symbols drop off and then spend hours finding more symbols to replace the ones that dropped of.
But I finally found a shortcut:
I got my friend Simon to do all the work for me and YOU can have it too.
Just download The Ultimate Watchlist.
This Watchlist has all the stocks that have passed over a dozen tests to make these symbols The Best To Trade Options On.
All the hard work has already been done for you.
Just download this list and use it the next time you are searching for a trade.
Just download The Ultimate Watchlist.
Trade With The Odds In Your Favor...
Allen Sama
