Frequently Asked Questions

Index

General
1. How should I use this site?
2. How can I use this site to evaluate options to be used with my stock portfolio?
3. How can I use this site to find and evaluate advantaged option investments that are unrelated to my stock portfolio?
4. What are some things I should do to investigate an option investment opportunity?
5. Why are reported data fields sometimes set to zero?
6. Why do I need to sometimes need to re-login?
7. Why does the site use delayed market data instead of real time data?

Quotes & Charts

8. Why don't your charts have as many features and user controls as those on other sites?

Analyzers

9. Why don't displayed results match results from calculators on other sites?

General

1. How should I use this site?
   Although the site can be used in many ways, there were two scenarios that are fundamental to the design of the site. The first way relates to investigating options to be used in conjunction with an existing equity portfolio. The second relates to taking advantage of opportunities presented by the market. These scenarios are described in the below questions.
2. How can I use this site to evaluate options to be used with my stock portfolio?
   A common scenario is for an investor to search for Covered Calls or Insurance (Long) Puts to match with equities in a portfolio.
   a) Using a text editor or word processor, create a list of ticker symbols for the equities in your portfolio. Add the ticker symbols of equities or indexes that could act as surrogates for your portfolio holdings. For example, if you are concerned about the value of a stock decreasing because of an event that would impact all stocks in the industry sector, you may consider buying an Insurance Put option on stock in the industry sector that you deem to be more fragile than yours.
   b) Format the list to ten or less ticker symbols to a line.
   c) Go to the appropriate analyzer page and set up the analysis parameters.
   d) For each line of ticker symbols, copy-paste a line of ticker symbols into the analyzer's ticker symbols field and run the analysis.
   e) Note the options that are favorably rated and fit your other selection criteria.
   f) Before buying or selling an option, thoroughly investigate both the structure of option and the company upon which it is written.
   g) If you are not under immediate time pressure to make a selection, you may want to repeat this analysis daily until an appropriate opportunity presents itself.
3. How can I use this site to find and evaluate advantaged option investments that are unrelated to my stock portfolio?
   A common scenario is for members to monitor the daily "Hot List" for opportunities.
   a) First identify the types of option investments that would be of interest. See the "Evaluating Option Investment Opportunities" topic in our education section for more information.
   b) Monitor the daily "Hot List" for the appearance of acceptable companies under the desired investment type headers.
   c) For each desired investment type, go to the analyzer page for that type of investment, set up the analyzer parameters, enter the list of acceptable company ticker symbols from the "Hot List", and run the analysis.
   d) If no investments look attractive, be patient. New opportunities present themselves every trading day.
   e) Before buying or selling options, thoroughly investigate both the structure of the option and the company upon which it is written.
4. What are some things I should do to investigate an option investment opportunity?
   In addition to studying the analyzer results, some common questions that should be researched are:
   a) What are the structures of the options involved in the investment? Most options represent 100 shares of underlying security. Mergers and spin-offs, however, often create "adjusted options", which have different underlying structures. These options confuse the analyzers and post erroneous results. Consult the option exchange web sites and your broker for this information.
   b) How strong are the company's fundamentals? Many web sites provide this type of information.
   c) When is the company's next earnings announcement or update? Implied volatility often increases just before these events. Earnings announcements and updates by companies in the same industry or in the product supply chain also have a similar impact. This information is usually available on the companies web site.
   d) What news and rumors are circulating regarding the company? Evaluate rumors that could impact the value of the company's stock such as acquisitions or scandal.
   e) Is there a major dividend distribution to go "ex-dividend" during the option period? The value of a share of company stock is reduced by the amount of the dividend on the ex-dividend date. For companies that pay significant dividends, this factor must be taken into account. (The analyzers model dividends as being continuously paid out.) Company web sites usually display information on past dividends. Sometimes they provide information on future dividends.
5. Why are reported data fields sometimes set to zero?
   The Market Data Database we use prepares itself for the next trading day by updating some fields and zeroing others. (Fields such as Volume, Open Price, High Price, and Low Price are zeroed.) These actions occur daily between midnight and 4 AM Eastern Time. The actions are usually performed in batches related to the exchange on which the security trades. Closing data is automatically cached. If data you request was previously accessed after market close, then all data fields will contain the closing data until 9 AM on the next weekday (Monday through Friday). However, if the data you request has not been previously accessed and cached and it has been zeroed in the Market Database, then the data will be reported as zeros. Since volume data can be used in analysis screening and result filtering, this could have a significant impact on the results of an analysis.
   
6. Why do I need to sometimes need to re-login?
   A session that is idle for more than 15 minutes is automatically logged off.
   
7. Why does the site use delayed market data instead of real time data?
   Using delayed market data was a business decision. Real time data costs substantially more and site subscribers would have to go through a qualification procedure to be allowed access. Delayed data works well with the types of features being offered on the site. Option prices don't change as often as stock prices. We have had good success using closing data to position trades at the next market open. However, we want to monitor our customers' needs for real time data as well as other site features. Please e-mail us with your requirements and suggestions.

Quotes & Charts

8. Why don't your charts have as many features and user controls as those on other sites?
   We choose not to make charting a differentiator for SelectOptions.com. Basic charting is provided as a convenience. We recommend that customers select a "charting site" to complement our analysis capabilities. Several good (and free) charting sites exist. Some are listed on our "Educational Links" page.

Analyzers

9. Why don't displayed results match results from calculators on other sites?
   The "text book" equations used to calculate probability and price are designed to use continuously compounded rates. Most calculators request interest rate, growth rate, drift, and/or dividend yield without specifying the compounding period. Using a rate with a wrong compounding period will result in errors. All rates requested by SelectOptions.com pages are annually compounded rates. These rates are automatically converted to continuously compounded rates as appropriate.
   We have also noticed that some sites misuse the "mean" of probability distributions for the "median". For security price analysis, which is modeled by lognormal distributions, this misuse results in errors.