lost in the bermuda triangle
FRO : Frontline Ltd. is a shipping company, headquartered in Bermuda.
great thinking guys.
P/E < 10. positive cash-flow. high, consistent dividend.
I HAD a slightly in the money covered call on this. Now it's slightly out of the money.
Their operating income seems to be falling. The amount of sell-off seems irrational.
should have stuck with married puts!
Options, intrinsic and premium
So I charted it. Intrinsic vs. Premium, normalized by Price. The distribution pretty closely matches my sketch from an earlier post. But it does illustrator a slight difference. Premiums are highest at-the-money, But they are also slightly higher in the money.
trying to visualize
how to gauge intrinsic, mid, and premium when there are sign changes.
| ticker | stock price | type | mid | strike | premium | premium to price | intrinsic value | intrinsic to price | intrinsic to premium | expiration date | open interest | captured |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NOK | 5.8 | put | 0.025 | 2.5 | 0.025 | 0.00431034 | -3.3 | -0.568965 | -132 | 2012-01-21 | 500 | 2011-07-29 |
| ANH | 6.92 | put | 0.05 | 5 | 0.05 | 0.00722543 | -1.92 | -0.277457 | -38.4 | 2012-01-21 | 10 | 2011-07-29 |
| NOK | 5.8 | put | 0.18 | 2.5 | 0.18 | 0.0310345 | -3.3 | -0.568965 | -18.333333333333 | 2013-01-19 | 920 | 2011-07-29 |
| NOK | 5.8 | put | 0.16 | 4 | 0.16 | 0.0275862 | -1.8 | -0.310345 | -11.25 | 2012-01-21 | 1171 | 2011-07-29 |
| ANH | 6.92 | put | 0.125 | 6 | 0.125 | 0.0180636 | -0.92 | -0.132948 | -7.36 | 2012-01-21 | 104 | 2011-07-29 |
| NOK | 5.8 | put | 0.39 | 5 | 0.39 | 0.0672414 | -0.8 | -0.137931 | -2.0512820512821 | 2012-01-21 | 7941 | 2011-07-29 |
time decay
A chart that illustrates time-decay of option premium. Lots of "learn about options" guides briefly touch on time decay. It pretty key to realize the premium is whats decaying.
probably the most important thing to understand about options
this illustration is probably the single most important thing to understand about options. A few disclaimers: I drew it in photoshop. If you actually plot historical option data a better fit could probably be found with some sort of polynomial function, or normal distribution, but this is just to illustrate a point: Premium is almost always higher near the money.
There are of course outliers. If you plot a bunch of intrinsic and premium data there will certainly be exceptional cases. These cases are what I am most interested in. They could be thought of as "bargains" or "market inefficiencies".
I feel that premium and intrinsic are probably the most fundamental variables related to options. Technical and Fundamental analysis both use math and comparison of ratios to spot outliers. However technical analysis makes an assumption that price is bound to some sort of probability distribution. It's not.
covered-call pick
great covered-call opportunity.
| ticker | stock price | type | mid | strike | expiration date | open interest | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NOK | 5.92 | call | 1.735 | 5 | 2013-01-19 | 12153 |
Good company, good fundamentals. You can probably get about an $80 premium per contract on this one, coupled with $0.95 of intrinsic value.
Dangers of this position include: If Nokia stops paying dividends. If the share price drops below around $4 then the losses will stop being offset by the shorted call. If Nokia shares go way up you will certainly miss some of that gain.
Good things about this position: It's a high premium. The premium + the intrinsic value offer downside protection. Nokia could slide up to 20% and you would still be in a good situation. Nokia pays a high dividend. If the share price goes way up, the premium will most likely go way down (highest premiums are usually near the money). The open interest is high, which is a good sign of liquidity (easy to find a buyer and seller).
Option Screener
It uses a lot of ajax calls which make the interface pretty great, but that also makes it pay a search ranking penalty. If you find this useful, do me a favor and give it a link.
Some detail: after getting the data, making minor modifications to the structures, then seeing how long some of the results took to load I realized it needed to be faster. For now I have a multi-tiered caching system that will reuse results that are less than something like 3 hours old. Initial loads can still be a little slow, but subsequent loads within the 3 hour ttl are pretty quick. Loading multiple tickers works pretty smoothly until there are over around 5,000 rows of options data. Caching cant fix this. I need to re-assess the data structures, filtering, and sorting. A lot of it is deferred to php code. If I moved all the attributes needed to create the filtered views to a database and did the filtering and sorting in database calls it would most likely improve the performance greatly. I personally think its the best options screener available. But I am still a little fearful to test the waters of options again, feels like playing with fire. You could definitely use it to potentially find low premiums for married-puts, which seems like a pretty boring way to use some great new options analyzer - boring is often good when it comes to investing.
tags: options, stock options, puts, calls, screener, intrinsic value, premium, finviz, google finance
Stock Options screener
update: option screener now available link
I've been working on an options screener thats similar to finviz or google finances stock screener. Below is a screen capture to show the kind of data, filtering, and sorting features it has. Of the few options screeners available, I think this one offers the most useful and intuitive interface, and data-columns. This screener in no way takes the risks out of options trading, but it does let you easily make comparisons of fundamental option characteristics. Easily interpretable premium and intrinsic value columns make it easy for you to understand risks and rewards of prospective trades. If you are interested in receiving optimally formatted options screens please respond to this post. Every time I release a new finance gadget, such as this one, it takes a while for it to catch on. So I think I will leisurely get to the few final touches, atleast until this post starts getting some activity.
-The Stock Market Moose
finding temporal bargains @ finviz.com
This is a demonstrations of how to use the finviz.com screener to find stocks that will likely rebound soon. We used a very loose set of criteria for this example, but the fundamentals of how to look for such deals are well visualized. The screening criteria at finviz are split into quantiles, sometimes making it difficult to narrow potential prospects to an optimal number. It requires a lot more playing around with than google finance's screener. It does offer many more criteria, and it's free. No complaints.
basic value screen @ google finance
This is a demonstration of how to set up a basic value screen at google. First we include mandatory constraints: long term earnings history, dividend, and ttm P/E. Then we narrow the selection to a couple dozen by upping the constraints. In the end we decide to sort the results by dividend yield. (we take an extra step here to eliminate outliers on the upper end, if a company is paying outrageous dividends it's probably going down the tubes). This is inline with Graham and Dodd's view of what makes a stock the most attractive in "Security Analysis" (the dividend). In "The Intelligent Investor" more emphasis is put on shareholder equity. They are both good approaches.
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