Introducing One of Our Best New Filters: ITM, OTM, ATM

Introducing One of Our Best New Filters: ITM, OTM, ATM

Since launching, we’ve been looking for ways to improve the Option Party platform. Through our own experience and after communicating with our users, we’ve been able to formulate plenty of new features for everyone.

This materialized in a big overhaul of our implied volatility features and included new filtering metrics. Some of these are financial based, like debt, earnings growth and dividend yield. Others are stock-statistic based, like market cap, P/E ratio and 52-week highs and lows. We’ve also allowed users to filter by earnings, ex-dividends dates and ETFs or stocks.

While these new features save investors time by having to do less manual work — i.e. finding an attractive setup only to find out it reports earnings in a week — it also allows investors to find the perfect trade, rather than just a really good one.

That’s why our latest feature will be really appreciated: “Moneyness.” Traders can now sort by how far in-the-money or out-the-money the trade will be. Option Party users can also sort by at-the-money options, if that better fits their style. 

Why is this helpful? Investors may be looking for a buy-write strategy, but may not want deep-in-the-money plays. Rather, they may prefer writing out-the-money calls on the underlying stock. Same with bull call spreads or bear put spreads; investors may prefer in-the-money over out-the-money positions and vice versa. Additionally, they may prefer at-the-money spreads.

Using the Moneyness Filter

To find the new filter, head to the “Screeners” tab once logged in. On the right with all of the other filters (beginning with “Strategy”) investors will need to find the “Options” tab. The first option in this category is “Moneyness” and its default setting is “No Preference.”

If we shift the selection to at-the-money, we’re all set. The Option Party system will only include trades that are currently trading ATM. Note that the system will still search by the rest of our criteria as well (P/E ratio, market cap, etc.). When it comes to ITM or OTM though, we have some additional choices. By selecting either input, we also need to enter how much we want the option to be ITM or OTM.

This is expressed in a percentage basis. For instance, we’re looking for covered call strategies that are in-the-money by 5%. Or perhaps we want a covered call that is out-the-money by 2%. The benefits of using the moneyness feature are obvious. Investors can now custom tailor where on the option chain the trade will take place. While some trades on the Option Party platform may be good, they may not be the ones we’re looking for based on ITM or OTM and how far in or out they are. This additional customization allows for even more pinpoint accuracy.

An Example on Moneyness

Let’s see this baby in action.

In an effort to work with the moneyness filter, we searched for a trade using the four most popular spreads: Bull put spreads, bear put spreads, bull call spreads and bear call spreads. On our first attempt, we sorted by only trades that were 4% in-the-money. If they weren’t ITM by that much or more, they didn’t show up. Here’s what we got:


After that, we went in the opposite direction. Instead of searching by ITM, we went to trade that were only 4% out-the-money. If the trade wasn’t 4% OTM or more, the system didn’t show it. As you can see from the results below, the top five trades are vastly different than the ones above. Of course, different strategies will allow for different risk/reward scenarios than what we have shown for demonstration purposes.

For our example, we used the bare minimum when it came to filters. That is, the only filter we selected revolved around moneyness. However, when that filter is combined with others, that’s when we can see good results go to great results. Increased filter use for individual traders will result in different trades. And maybe there won’t be 20, 30 or 100 different trades to chose from. It may only be a few trades. But that’s actually a good thing.

These trades are likely to be of higher quality, given that the traders specifically used various filters to whittle down the exact specifications they’re looking for. That was the hope when Option Party started introducing new filters. Broad sweeps are still doable, but the ultra-specific investor now has a way to save some time and still find gems to trade.

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