Comments

You must log in or register to comment.

mytendies OP t1_iuigjmn wrote

Hi WSB, this table shows which options are most liquid and have the tightest spreads. I then calculate an "efficiency" value based on those spreads, the option pricing, and essentially how much of your profits will be lost to friction/slippage/commissions when trading that particular option.

I also include the expected move for "this friday" and each stocks "beta" when compared to SPY.

Is this helpful or too regarded?

How else can I improve this report?

16

mytendies OP t1_iuijxms wrote

slippage is bid - ask / price of the option / 2.

It assumes you are going to pay "half" the bid ask spread to get in, and half to get out. Wide bid ask spreads = more slippage = less efficient.

I guess the word friction should not have been used and isn't really relevant. My b

6

mytendies OP t1_iuilkp2 wrote

going to try and work in "average daily volume" and consider open interest as well to give a probability of getting filled at that mid price. Not an exact science but let me know if you have any ideas/suggestions

4

qb_source t1_iuim3ro wrote

I typically factor in the margin requirements so I can come up with some sort of way of comparing the amount of premium for the amount of capital at risk.

For example, IWM and TSLA are high on your list but IWM has a much lower requirement

2

mytendies OP t1_iuinime wrote

Those margin requirements are broker dependent tho right? And just to be clear, it would be the same "capital at risk" but the "buying power reduction" would be different for each. Correct? Just want to be on the same page

1

SmallRadComp t1_iuio93u wrote

You write this script? If so do you have a github?

2

mytendies OP t1_iuiodw6 wrote

Yeah maybe I can look at "beta" and make an assumption. High beta = more margin required.

Need to get IV rank on here as well.

My goal is to have this report indicate "these are the "best" options to be trading today" from an efficiency perspective.

2

qb_source t1_iuionrj wrote

It might be helpful to show if the underlying has dividends and if the underlying is a partnership or not, if you are going for efficiency in taxes.

Edit: corrected typo

1

qb_source t1_iuis46t wrote

By partnership I'm referring to LLPs, like REITs. I stay away from them because of the extra tax paperwork and the expenses that come with it.

I only mention them because of your focus on efficiency, specifically that as far as option trading goes, they are not worth it.

How the underlyings are taxed and how earnings are returned are additional ways to measure efficiency.

Indicating which underlyings offer dividends and how often and how much would be good too.

1

ProFoxxxx t1_iuitimt wrote

Wtf is this? The Matrix?

9

somo1230 t1_iuivnhl wrote

"Expected move"?? Mmm?

2

mytendies OP t1_iuiw2ih wrote

yep. Did it make sense to you?
If you take the call and put prices, expiring this friday, you can extrapolate what they market is pricing the expected move for this friday.

2

mytendies OP t1_iuiwaiu wrote

Nahh... you click it, it comes up trying to fit in one browser window, which is too small, you click again to zoom. Now it is not blurry (at least on my side).

Either way its too hard to read as is so I will fix it up

3

mytendies OP t1_iuiwl1e wrote

Yes I wrote the script, yes there is a github but not ready to share that just yet. Going to dial this in a bit better and then try to share it daily with the sub.

Even if I shared the script you couldn't run it without the data service I am paying for - and... uh... also don't have redistribution rights to.

5

kickeast t1_iuj3blw wrote

highlighting the ones that are over 365 days to avoid short term tax

1

makina323 t1_iuj3dh9 wrote

If you're gonna make it a daily post, then chop it off into sections, top 10, top 50, top 100 etc.

1

zac_usaf t1_iujhmh8 wrote

Jesus Christ dude, lay off the Adderall , no wonder there is a shortage!

3

robbinhood69 t1_iujm935 wrote

i'm pretty sure this information is useful

i'm also sure none of us know how to use it

5

polloponzi t1_iujo8b2 wrote

>Hi WSB, this table shows which options are most liquid and have the tightest spreads. I then calculate an "efficiency" value based on those spreads, the option pricing, and essentially how much of your profits will be lost to friction/slippage/commissions when trading that particular option.

What can you do with 'efficient' options? How you take advantage of this information to earn money?

1

fortinvestech t1_iujpihy wrote

Data source?

Too much data = overload = not actionable.

1

mytendies OP t1_iujrcf6 wrote

a top financial data broker... rather not say. But it is aggregate data from "all" the exchanges compiled at the date I run the report.

fair enough and figured I would get that feedback. what should be good target for this audience?

top 25 options and then maybe 5 columns of data? I think that would make a nice "square" that is more actionable

1

fortinvestech t1_iujs6ru wrote

Just wanted to give the feedback :). You seem to be passionate about data and markets. I sent you a PM.

Actionable is very subjective. I could take action on all the data while someone else might not be able to take action on 5. I think the other comments might be more concrete on this point.

2

polloponzi t1_iujugyi wrote

If you want to do a detailed post then that is awesome, but otherwise just a comment with a summary on how you turn this info into a profit may be enough for me to understand the gist of it.

1

mytendies OP t1_iujz4te wrote

you need to transact on liquid options to make money. Period.

if you try to buy an option for $100, but can only get a fill for $105 and then try to sell it 1 minute later for the $105 you paid, but can only get a fill for $95 then... you lost $10 in 1 minute getting in and out. That is 10%

What most people don't realize is that this bid ask spread robs them of a large portion of their profits and it amplifies their losses.

​

now if you look at my chart you can see the "efficiency" column and determine the most liquid, most easily transacted, tightest bid/ask spreads.

In my example above, if you have a highly efficient option, you might want to buy it for $100, get a fill for $100 and then be able to sell it for $100. That is highly liquid and easy to trade.

Those are the options you want to be playing with.

6

polloponzi t1_iuk2z8w wrote

>you need to transact on liquid options to make money. Period.
>
>if you try to buy an option for $100, but can only get a fill for $105 and then try to sell it 1 minute later for the $105 you paid, but can only get a fill for $95 then... you lost $10 in 1 minute getting in and out. That is 10%
>
>What most people don't realize is that this bid ask spread robs them of a large portion of their profits and it amplifies their losses.

It seems to me you are looking to day-trade or swing-trade options.

I don't usually do that, I hold options for at least a week usually, so the bid-ask spreads don't really matter much to me.

When I want to day trade options I just trade the $SPX options that are by far the most efficient and liquid options you will be able to find. On top of that they are cash-settled so you can do all kind of spreads without worrying about pin risk or assignment. Check those.

1