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Strategies & Market Trends : Option Simulator / RT

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To: jim quiz who wrote (7)	4/11/1997 1:58:00 PM
From: Harold Lanier	of 31

Jim, 1. Percent Bias is part of the screening conditions. The idea is to try to eliminate options whose prices are clearly out of line. If you leave these options in the scan, they tend to dominate the results in the sense that they are inlcuded in every position. Rather than putting bias in absolute terms, like 2 dollars overpriced,OS puts it in percentage terms, such as 200%. Because 2 dollars may be a lot or little depending on the price of the option. 2. Percent to double is currently not one of variables in Market Scan. Maybe in a future release. 3. Overpriced is a bit tricky, because you can make any option look overpriced by using an appropriate volatility estimate. Scanning for overpriced options based on theoretical value means that you have to have proper volatility estimates in place. Alternatively, you can scan on market prices alone. An interesting scan developed by another OS user, that will pick out high premium options is: Query: stock&&call&&vol>1&&uask>0&&(strike-uask+bid)/uask>.05&& month=4&&bid>1 Sort: (strike-uask+bid)/uask This scan will come up with high premium options. I get delayed data for equities so only truely accurate as an end of day scan,where I replace uask with last.

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