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Options signal methodology and ranking limits

This page describes what goes into a ranking and where it stops being informative. It describes categories of logic, not a guarantee of any outcome.

What the analysis evaluates

Inputs, screening stages and outputs. Specific formulas are not published.

  1. Contract data evaluated

    • Options chain
    • Greeks
    • Implied volatility
    • Volume
    • Open interest
    • Bid / ask
    • Strike distance
    • Expiration

  2. Analysis and screening

    1. 1Universe and exclusions
    2. 2Expiration window
    3. 3Strategy filters
    4. 4Liquidity and quote checks
    5. 5Normalize per day

  3. What you review

    • Ranked candidates
    • Premium, return, breakeven, capital
    • Warnings such as event risk
    • Payoff scenario at stated assumptions
Sold options are priced at the bid and bought options at the ask. Ranking compares trade-offs and does not forecast direction.

Implied volatility and expected range

Implied volatility: the range the market prices in

Example: $100 stock, 30 days to expiration. One-standard-deviation move = stock x IV x sqrt(days / 365).

Illustrative example
  • Lower IV 20%+/- $5.73

    Smaller expected range, lower premium for the same strike and expiration.

  • Typical IV 30%+/- $8.6

    A middle reading for this example.

  • Higher IV 50%+/- $14.33

    Wider expected range and larger premium, with more risk of a large move.

Bars span the one-standard-deviation range around the stock price. Not a forecast. IV rank in the product uses a realized-volatility proxy, not a historical implied-volatility rank.

Inputs

Rankings use listed option contract data (strike, expiration, bid, ask, open interest and volume), the underlying price, and Greeks and implied volatility where available or computed. For covered calls, recorded share lots are used. For cash-secured puts, recorded cash is used.

Filters

  • A delta ceiling limits how close to the money a short option can be.
  • Liquidity checks screen for open interest, volume and bid-ask spread.
  • Strategy rules enforce valid structures: same-expiration spreads, long-dated legs with later expiration, and so on.
  • Event warnings flag known risks such as earnings where detected.

Normalization

Returns across different days to expiration are converted to a comparable basis so they can be viewed together. Normalized and annualized figures are comparisons. They do not promise that the trade can be repeated at the same terms.

Pricing assumptions

Sold options use the bid, and bought options use the ask, to avoid assuming the midpoint. Actual fills can be better or worse. The payoff model includes a $0.65 entry commission per option leg for spreads, and excludes exit and assignment fees and taxes.

Implied volatility and IV rank

Where implied volatility is missing, the platform may compute it, and marks the value as computed. The IV-rank figure uses a realized-volatility proxy and is not a historical implied-volatility rank.

Probability estimates

Probability out of the money is derived from delta, which is a model sensitivity. It is a rough estimate, and not a forecast.

Limitations

  • Data is a timestamped snapshot, not a continuous feed.
  • Models cannot see news, gaps or changes after the snapshot.
  • Past or saved results do not predict future outcomes.
  • No ranking replaces your own judgment of your risk tolerance.

Related pages

Research the trade before you place it

Create a free account to record holdings and cash and browse universe research. Premium adds the strategy tools. Eligible new customers can start a 7-day Premium trial; a payment method is required and the plan bills automatically unless canceled. Registration alone is not a Premium subscription.

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