Identify Put Spreads With High Theoretical Returns
The OptionsHouse Spread Investigators scan the universe of equity options to find call and put debit spreads with potentially high theoretical returns.
To do this, Spread Investigators:
- Multiplies the return if the underlying stock in a spread reaches the higher of the two strike prices (for call spreads) or lower of the two strike prices (for put spreads) by the probability that it will reach that price, as determined by option Greeks
- Subtracts from this amount the cost of acquiring the spread using market prices for the call options
- Divides the resulting amount by the cost of acquiring the spread to determine the theoretical return
In addition, Spread Investigators attempts to filter out bad data and spreads that may be overly complicated because they are the result of a corporate reorganization.
Because call spreads with high theoretical returns often have strike prices well above the current stock price, the probability of achieving the theoretical return is often low.
Spread Investigators is intended to provide you with information and educational data and ideas. The ideas provided by Spread Investigators are not recommendations and you should not act on them as such. The Spread Investigators strategy and the ideas it generates may not be suitable for your portfolio or financial situation. If you decide that you would like to execute an idea that is shown in Spread Investigators, the tool has a trade button for your convenience, but you will be solely responsible for the applicable trading decision.