Finding Better Trades Starts With Better Filters

Finding Better Trades Starts With Better Filters

Last week we introduced a slew of new features for Option Party users. Scanning by P/E ratio, institutional ownership and 52-week highs and lows were just a few of the new filters put into place.

Going into a scan, traders can start with as broad of a sweep as they want. Using a host of different probabilities and trading strategies, investors can begin to narrow down their search. Incorporating valuation, market cap, earnings dates and ETFs vs. stocks makes it that much easier to find the perfect trade.

So what new features are coming users’ way this time? Once logged in, head over to the “Screeners” tab in the upper left hand side of the screen. From there, start a new scan or choose from an existing setup. Last week we focused on the “Stocks – Stats” scanning tab. Again, that can be read about, here.

Today, we’re focused on the “Stocks – Financial” tab.

Stocks financials filter in Option Party


Dividend Yield

It’s no surprise that many investors like their dividends. Many dividend-paying companies will pay the distribution quarterly. However, some pay monthly, like MLPs and REITs, some pay once a year and some pay bi-annually (twice per year).

The yield is calculated by dividing the distribution amount by the stock price. For instance, if ABC is trading at $50 and it pays a $2.00 annual dividend, its dividend yield is 4%, ($2 / $50 = 4%).

While investors may have a keen interest in a stock’s dividend, many short-term traders may not care whether or not the company pays a dividend. In some regards, option traders may not want the company to pay a dividend, because its stock price is impacted by the amount of the dividend when it trades ex-dividend. Other times, traders are searching for yield, perhaps as part of a dividend capture strategy.

In any regard, users can now search for stocks based on yield. On the Option Party platform, this comes in the form of “Very High” for yields above 10%, “High” for yields north of 6%, “Moderate” for yields in excess of 3% and “Low” for yields above 1%.

Dividend Amount

In a similar manner, traders can also search by the payout amount rather than by yield. Generally, investors are more interested in the yield. But in specific incidences — such as when the dividend plays an integral role in the trader’s strategy — they may be inclined to search by the actual dividend amount. In addition to searching by the dividend amount, traders can also search by yield and the dividend amount, adding more specificity to their search criteria.

On the Option Party filter, dividend amounts are sorted into four categories: “Very High” for payouts above $5 per share, “High” for payouts above $1, “Moderate” for payouts above 25 cents, and “Low” for payouts above a penny. It should be noted that these payouts are on a per-share basis and are based on the quarterly distribution.

Current EPS

Investors can now scan by current earnings per share. When used in conjunction with market cap, dividends, share price and other metrics, the earnings figure has a place in some traders’ arsenal as well. On the Option Party platform, they can scan by a wide range, going from “Over $10” to negative $10 in earnings per share.

Why is earnings per share useful? First, bullish investors may want to look for stocks that have positive earnings, in order to find stocks with more potential upside. They may also be searching for stocks that have close to break-even or possibly even negative earnings power, in order to find stocks that could turn it around in the near-term. Bearish investors may be looking for stocks with negative earnings results in order to find attractive short setups.

Earnings Growth

However, the earnings per share scan can really hit its stride when teamed up with the “Earnings Growth” filter. This filter allows investors to sort stocks by how fast or how slow it’s growing its earnings.

On the platform, investors will be able to sort by six choices: Over 50%, over 20%, over 10%, over 5%, over 1% or no forecast (0%).

This allows bulls to sort by rapid growth in the same way it allows bears to sort by low growth. Bears may also look for high growth stocks that are trending higher but may be overbought, in the same way that bulls may search for out-of-favor, slow-growing stocks that are oversold. Again, using these metrics in different combinations with other filters and strategies allows investors to be both specific and flexible in their searches.

Current Assets and Liabilities

As we continue, we now have the ability to scan by some of the balance sheet’s major components, namely assets and liabilities. Some bearish traders may combine the market cap filter with assets and liabilities. A company that has the former shrinking and the latter growing could be cause for concern. In the same light, bulls may be looking for growing assets and shrinking liabilities.

Luckily, Option Party members are able to use both filters in their scannings, in order to pinpoint exactly what they’re looking for. Starting with “Current Assets,” users will be able to search by three amounts: “Over $10 billion,” “Over $1 billion” and “Over $100 million.” When searching for “Liabilities,” investors will have the same set of choices.

It should also be noted that they can sort by just one of these filters should they choose to.

Long Term Debt

Debt is another important component to the balance sheet that many investors turn to. Why? Because a company that otherwise seems fine, can either be an absolute buy or an absolute sell based on its debt load. Of course, there’s many options in between, too.

But the debt is an amazingly flexible metric to use, meaning both bears and bulls can sink in their teeth into it. A company can go from good to great based on having no debt. In the same way, a company that seems to be doing fine can have an unbearable amount of debt hanging over it, taking it from a good-looking stock to a bad one.

In this case, the debt here is important. Now Option Party investors will be able to incorporate a company’s long-term debt into their trades. There’s three choices in the “Long-Term Debt” filter: “Under $100 million,” Under $1 billion” and “Under $10 billion.”

This metric can give bears the extra catalyst they need to find a fundamentally unsound company. It can also gives bulls the advantage if a company has little or no debt; or it can wave a red caution flag to bulls to avoid a stock that has too high of high debt load.

Long-term debt can be used in a combination with a bunch of different filters to maximize its meaning. For instance, a $10 billion market cap company won’t struggle with $10 billion in debt the way a $2 billion company will. So context is important. The same can be said with any number of metrics that have been launched on Option Party over the past few weeks. Going forward, there will be even more choices. While this may result in a few extra clicks for the trader, the selection of choices could become far more profitable. For that reason, investors should start experimenting with different combinations of filters to see which ones work best for them.

Thanks to Opportunity Alerts, users can also make very specific trade requirements that don’t result in very many trades per month or per year. However, because the Option Party system continues to scan for these setups day in and day out, users will be notified if and when a hit pops up. Post-notification, they can enter the trade should it fit their risk/reward profile and thanks to probabilities, it could be highly profitable for them.

Other Reads

How Leveraging Implied Volatility Can Vastly Improve Your Trading

Ready to Filter Your Trades by Earnings and Ex-Dividends Dates? Now You Can

Welcoming a New Feature: Scanning for and Excluding ETFs