Screening for Stocks and Options
Screening for Stocks and Options
Many of our option subscribers also have access to the Value Line Investment Survey online and to its Stock Screener. What these subscribers may not know is that they can use this Stock Screener to select a list of stocks and then automatically transfer these stock selections to our Option Screener. In this week’s report, we walk you through an example of how these linkages work, and how you can easily find the right options for the stocks that you have selected.
The Value Line Stock Screener
The Value Line Stock Screener is available at http://www.valueline.com/ to all Print and Web subscribers of the Value Line Investment Survey and to Value Line Research Center subscribers. (The Research Center includes full online access to basically all Value Line web subscriber services.)
Screening for Stocks
Value Line’s online Stock Screener is easy to use. You will find a help menu on the left side of the page, which includes “Questions and Answers,” “How to screen a stock,” “How to Save a Screen” and “How to customize your Display Options.” If you want to limit your search to a particular list of stocks, you can enter their ticker symbols in the box so marked. You can also select stocks in a specific industry or in specific industries. (Simply hold the control key to select more than one industry.) Moreover, you can select the Value Line Ranks and Ratings that you want, including Timeliness, Safety, Performance (Small and Mid-Cap Edition subscribers only) and Technical Ranks and Value Line Financial Strength Ratings. The Stock Screener also provides a list of Preset Screens to speed your stock selection. Finally, the Screener allows you to set maximum and minimum values on a long list of criteria, which includes Annual Returns, P/E Ratios and 3 to 5 year Projections.
A Sample Stock Search
In our screener (results shown in Figure 1), we selected the preset screen, “Stocks with the Highest 3 to 5 Year Appreciation Potential.” These are stocks that, based on their 3 to 5 year projected earnings and P/E ratios (both prepared by our Value Line analysts), have the chance of making truly large gains in the future. To pare down this list, we excluded stocks with a Timeliness rank of 5.
In our example, we have found 75 stocks, which we have sorted in alphabetical order. Note: even after excluding rank 5 stocks, the list still might contain some stocks that have very real near-term problems. Thus, their longer-term earnings projections, while attractive, can still be tentative. Therefore, we urge subscribers when selecting stocks from this list to always read the stock’s full-page Value Line report. You can access these reports online (in PDF format) by clicking on the Adobe Acrobat icon to the right of the company name and ticker symbol. Clicking the page symbol brings up our HTML page on the same stock. This page will have the most recent Investment Survey information.
Figure 1 – Screening for Stocks with the Highest 3-5 Year Price Appreciation Potential and a Timeliness Rank Greater than 5
Opening and Using the Option Screener
Click on the left-hand box to select stocks you want screened for options. You can click on the box at the top marked “Company (Ticker)” to either select all the stocks in the list or to clear the selections.
After you have selected the stocks you want, click on the upper right hand link marked “Open Options Screener with Selected Stocks.” This will immediately open the Option Screener with stock ticker codes embedded into the box for “Stock Ticker(s).” We can now set the criteria for options that are best for your chosen option strategy. In the example in Figure 2, we have shown the screener results searching for favorably ranked covered calls (Ranked 1 or 2) that offer a per annum yield (Annual Return) of 10% or more and a breakeven (or “Downside Protection’) of 10% (or more) below the current stock price.
To get a closer look at these covered calls, you can tag the left-hand boxes and click on “View Profiles.” In Figure 3, we show a sample of two of these profiles. Brightpoint July 2012 $10 covered calls, for instance, offers a 20% per annum total return and protection to a price that is 17% below the current stock price of $10.85.
Figure 2 - Covered Call Options with Downside Protection of 10% and Annual Return of 10%
Figure 3 – Profile of Selected Options
At the time of this writing, the authors had no positions in any stocks mentioned above.