This week’s report is a follow-up to our February 2, 2009 report, “What’s free (or almost free) from the Exchanges” (Ot090202.Pdf). This time around, we review what you can get for free (sometimes on a trial basis) from various commercial websites. Before you go and spend big bucks on software, data or training, you should see what is available for free. Often, these sites offer services that can be used in conjunction with The Value Line Daily Options Survey to help you with your option trading and portfolio management.
The use of listed equity options is becoming more mainstream every day, due to a number of factors. These include; (1) recent extreme volatility of the market and the rising use of options as hedges, (2) faster internet access, (3) more competitive trading (thanks partly to multiple exchange listings) and, (4) a full playing field of brokers eager for business. Some of these sites offer free information and services as a venue for online advertising targeted to the options investor. Other free offerings are designed to introduce investors to the company’s fee-based services, including analysis and brokerage services.
Three News and Information Sites
Futures & Options Trader (www.futuresandoptionstrader.com) is a monthly fullfeature magazine in downloadable Adobe Acrobat format. The magazine offers in-depth reports on trading strategies as well as analysis, news, and educational supplements. The February issue of Futures & Options Trader offered two strategy articles by industry experts; “Cut Straddles in Half with Backspreads,” by Marc Alliare (formerly of the CBOE), and “Adjusting Covered Calls to Market Trends,” by Steve Lentz and Jim Graham (of OptionVue).
The Options Insider (www.theoptionsinsider.com) offers timely articles on the options market and interesting downloadable online radio reports. The latest radio report was “What’s ahead for the Boston Options Exchange?” This report gives some interesting insights as to how this exchange can manage to hold onto a small but still significant share of equity option trading volume.
OptionMONSTER (www.optionmonster.com) specializes in keeping its eyes pealed for unusual trading activity in options (using proprietary algorithms to screen out noise). As an introduction to its services, optionMONSTER allows you to view some of its intelligence reports after they have been disseminated to fee-paying subscribers (see 2 Figure 1 below). In addition to these option activity notices, optionMONSTER offers a useful suite of free services. Entering a ticker symbol and then clicking on Ticker Trigger brings you to a full menu of fundamental and technical information (from various wellknown providers), including an array of charting tools from www.StockCharts.Com
We have listed these three online brokers because they allow you to “paper trade” an options portfolio using their data feeds and analytic tools. You may want to use these simulated portfolios to test our Value Line Option’s recommended trades. Subscribers could do well to read the Barron’s annual report on online brokers. The most recent of these reports was on March 17, 2008 (link available on request). A report for 2009 is expected next month.
ThinkorSwim (www.thinkorswim.com) was number two among the 23 online brokers rated by Barron’s last year. ThinkorSwim was especially praised for its order-execution features, which makes the site a favorite with many active traders. You can get a free trial of the ThinkorSwim trading software along with its excellent tutorial.
OptionsXpress (www.optionsxpress.com) also highly rated by Barron’s last year definitely deserves a look. For the visitor, OptionsXpress offers free delayed-time option chains on all stocks - with some very attractive features. Click on any option ticker displayed and get a detailed profile of the option, complete with implied volatility, delta, gamma and theta of the average bid and ask premiums.
tradeMONSTER (www.trademonster.com) was launched late last year. The site is especially rich in option features. One of these is its trade simulator, which lets you tie your actual portfolio to simulated trades, thus helping you effectively evaluate hedge alternatives to an existing exposure. tradeMONSTER received a very favorable review in the November 3, 2008 issue of Barron’s.
Other Free Offerings
The options analyzer found at Yahoo! Finance (www.optionsxpress.com) offers interesting analysis and charts for four basic option strategies (call buy, put buy, covered call and put write). The technical graph, shown side by side with the option strategy graph (powered by Optionetics) is an attractive feature (see Figure 2 below).
Schaeffer’s Research at www.schaeffersresearch.com has long been the provider of an impressive arsenal of stock and option analysis tools. Among the free services you can get from Schaeffer’s Research is the weekly email newsletter, Monday Morning Outlook, which gauges the market using technical price analysis and options data.
We recommend that you take the time to browse at least some of the sites listed above. We would like to stress, however, that none of them offers what The Value Line Daily Options Survey offers – i.e. option rankings and volatility forecasts on virtually all regularly listed equity options, updated twice a day. Combined with our download data and our Excel-based option templates, our service - at only $149 - is also “almost- free.”