Thinkorswim is a tremendous platform capable of more than just fancy charts. While Thinkorswim’s charts are second to none in my opinion today lets take a look at their scanning function. Particularly, a bull put spread scan.
For more information on Bullish Credit Spreads here is a breakdown from Fidelity.com.
This scan will only return truly high probability trading candidates so please be aware that many days no candidate will exist at all. However, when it does return a possible candidate you can consider that trade with confidence. Of course, nothing could guarantee the trade will succeed but this scan, in my opinion, is the next best thing.
Bull Put Spread Scan Criteria
*All criteria requires a “D” or Daily setting
Criteria 1 – “Stock” Filter – Last price between $10 – $500
Criteria 2 – “Option” Filter – Open Interest minimum of 5,000
Criteria 3 – “Study” Filter – Custom – Price crosses above 9 EMA
Criteria 4 – “Study” Filter – RSI_Scan – The RSI with a length of 14 and a Wilders average type, is Less Than 50
Criteria 5 – “Study” Filter – Average_Volume – The 50 period Simple moving average of the Volume is greater than 1,000,000
Criteria 6 – “Study” Filter – IV_Percentile – Implied Volatility percentile is between 50% and 100%
Criteria 7 – “Study” Filter – StandardDeviationChannel – The Close is Less Than 1.0 times the standard deviation of the 252 period linear regression line
Bull Put Spread Scan Description
Our first criteria is simply looking for a stock trading between $10 and $500 dollars. Thus, offering the following criteria thousands of options from which to find a potential candidate to trade. Next, we want a tradeable options market so to eliminate the vast majority of stocks with illiquid options markets the open interest setting is required.
The third setting is a simple custom filter looking for only stocks that have closed above the 9 period EMA line on that day. This setting will eliminate the vast majority of potential trades and leave us with only the best candidates to choose from. Next, the RSI Scan filter will remove any stocks that are not oversold and the Average Volume will only accept stocks gaining relative strength. These two scans a paramount to finding an asset that is ready to move immediately.
Finally, the Implied Volatility filter will eliminate those low volatility stocks. This is important for two reasons. One, the filter returns those stocks ready to move. Two, it returns stocks whose options markets are currently trading at relative premium. The final criteria looks for stocks that have been beaten down to an extreme level. To do that I use the Standard Deviation channel filter.
All together, this collection of filters and studies returns a very short list of assets that are both capable of moving immediately and highly likely to move in the desired direction. Of course, nothing is guaranteed but if there were a next best thing, this would be it.
In total, this scan offers the interested trader the ability to avoid those all to common analysis sessions that last for hours. Most traders have a full time job so spending hours finding potential trades is a chore to say the least. To avoid just that I created this scan to only find the most capable trading candidates. However, if I were consistently unable to find a trade I would simply remove the 9 EMA crossover filter. It isn’t actually necessary and the other filters would still provide very high probability trades.
I do hope the scan helps anyone interested to view it. Please don’t hesitate to reach out in the comments below to let me know how the scan works for you.