All Options Contracts in the S&P 500 Are Now Publicly Available on Our Option Screener
We’re proud to offer this to the community — compare and contrast options with a data-driven approach at an index-wide level.
Option Screener and The Wheel Screener are trader-friendly option screeners that analyze, classify, and categorize all options available on the market on a given day. The team is always more than happy to share their technical insights, market opinions, and methodologies here on Medium. In this post, we talk about how we’ve made the S&P 500 contract data set public, and how we go about scoring and ranking the massive amounts of options in these datasets against one another. We hope you enjoy the article!
Options Trading — The Driver of Markets and the Origin of The Wheel Screener
For quite a few years now, options trading has shadowed stock or for that matter, any other asset traded in terms of volume and how much markets react to them (read: GME or AMC price spikes). The problem is, as much as options are utilized in the modern markets, everyone is so used to the single-page options chain for a given underlying symbol. There are very few services that compare all options across the entire market. The Wheel Screener and Options Screener were built to fill sorely missed market-wide options screener tools. The Wheel Screener focuses on cash-secured puts and covered calls exclusively, while Option Screener, in development, will scan for all combinations of options strategies, including multi-leg strategies.
Release of the S&P 500 Dataset
At Option Screener and The Wheel Screener, we’ve just opened our full S&P 500 dataset for public use, which includes typically around 7,000–9,000 contracts per given trading day. (Small plug: if you want access to the full dataset, typically on the order of 30,000–40,000 contracts per day, you’ll need to upgrade to our premium option).
When grappling with such a massive dataset, we arrived at a challenging question: how can one compare and contrast options on a market-wide basis? How can even the most genius and intense traders claim or feel that one contract stands out uniquely out of thousands? The only correct way in our opinion is to rank said contracts against one another globally. We’ll talk about how for The Wheel Screener we score cash-secured puts and covered calls, as the calculation becomes more complicated for multi-leg strategies.
Calculating the Score
As an initial beta, we calculate the option’s score rather naïvely by taking the arithmetic average of the probability of profit and reward-to-risk ratio:
- Wheel Screener Score (WSC): (probability of profit + reward-to-risk ratio) / 2
The probability of profit is calculated from the delta of the option, which comes from the Black-Scholes model for pricing options. It’s not perfect, but is a decent first-order approximation:
- probability of profit (POP): 1 — delta
The reward-to-risk ratio is the ratio of the maximum credit to the maximum collateral:
- reward-to-risk ratio (RR): maximum credit / maximum collateral
Alone, this score doesn’t have much meaning, since it’s a blend of two probabilities — it would be an arbitrary decimal anywhere from 0.0 to 0.1. The analytical value of this score is revealed only after we normalize this score among all contracts, in other words, scale the scores so the score is relative from 0 to 100 for all contracts. Taking the Wheel Screener Score (WSC) from above, during the normalization step, we take the max Wheel Screener Score out of all the options and use that as our denominator of the current option score. Multiplying by 100 yields our clamped score from 0 to 100 across all options:
- normalized score: (WSC / max(WSC)) * 100
Are There Better Scoring Algorithms?
With this normalization methodology, there is a lot of room to run. We’ve already cooked up dozens of scoring formulas, but we’re going to do even better. Soon, you’ll be able to design your very own score formula, using a drag-and-drop UI to pick metrics and weights of your choice. Trader tastes and customization have always been a cornerstone of our products, and we’ll continue to build our products with that mindset at the forefront of everything we build. Our goal is to provide complex analytic option scanners, calculations, and tools to individual traders that were previously only available to the Wall Street elite. We hope that after checking out our tools, you’ll agree and will consider joining our community.
Thanks!
We hope you found this informative and it’s sparked some ideas as to how you can compare and contrast contracts at a market-wide scale!
Until next time, best of luck, and stay safe out there in those markets!
-Option Screener Team 🛞
We’re on a mission to make options data, strategies, and analysis tools 100% accessible and customizable for traders of any trading style and skill level.
Interested in learning more? Check us out at Option Screener and The Wheel Screener.
Want to talk options trading, strategies, and more? Join us on our Discord to talk shop!
