My Top 10 Stocks for Options Plays This Week

The biggest market drop in recorded history on Monday… a wild end-of-day plummet on Tuesday… a huge up day on Wednesday… and more bullish action today?

Talk about opportunity!

Right now the only real barrier to trading profits is a stock that doesn’t move.

So in times like this, I like to use a really great tool that identifies what I call my “Top Movers” – the stocks and ETFs that have had the biggest % move and best correlation to the market. They’re listed at the right. In this way I can focus on finding the best stock with the best option trade, with the best potential to double in value on the smallest move in the stock.

That’s a lot of “bests.”

This is a really simple tool, and I know you’ll like it.

The Second-Biggest Obstacle to Options Profits

When trading options, time decay – the loss of value as expiration approaches – is the biggest obstacle to profits.

But the second-biggest obstacle is a stock that DOES NOT move.

You can do all your homework and make all the right moves, pick a solid stock with good fundamentals, even anticipate where the markets are going in the weeks ahead.

But if the underlying stock or ETF doesn’t move, your options will simply waste.

When the stock does not move, day after day, the time decay is even worse. You’re not getting any stock price move that is either intrinsic to counter theta decay, or you are not getting any stock price move that gets your options close to “in the money” to get you that intrinsic value increase.

This is why I favor the “in the money” (ITM) options to begin with on my shorter-term directional long call or put option trades.

You can probably see where I’m going with this. The best way to avoid this is to trade calls and puts on stocks that move in price. You can see movement or volatility in price by looking at a chart. If a stock trades sideways in a range for three, six, or more months, that is not a stock to try and trade options on.

That’s not to say you should avoid any stock that trades sideways. If that sideways range trades slightly up or down in trend but has a five-point range between support and resistance, then trading options on that stock becomes very lucrative.

I am not a fan of going through all the optionable stocks one by one on a charting program. There are over 2,500 optionable stocks, and when you add in ETFs and indices, that number goes way up. Trying to go through them one by one will eventually drive you crazy.

Fortunately, I’ve developed a great method to whittle it down to the 10 best stocks at any given time.

How I Find My “Top Movers”

I run a scan that searches for what I call my “Top Movers.” First, I look for only stocks with options that trade in penny increments, typically within a $0.05 bid/ask spread. That narrows it down to around 250 stocks in total.

You can find that list of stocks, called the Penny Pilot list, at the CBOE website

ppt 1

Sifting through 250 stock charts looking for volatility is still a lot of work, so to cut that number down even further, I set my search parameters on that list in the following manner:

  1. Stocks over $100 per share
  2. Stocks that move an average of 1% a day between the high and low
  3. Stocks that correlate to the market (in this case, SPY)

Here is a snapshot of the search results (taken Wednesday afternoon). These are stocks that meet the above criteria and have been on the move over the previous seven days.

PPT 2.png

Usually a few of the top spots will be ETFs, but here we have a solid collection of stocks including Celgene Corp. (NASDAQ:CELG), F5 Networks Inc. (NASDAQ:FFIV), Gilead Sciences Inc. (NASDAQ:GILD), UnitedHealth Group Inc. (NYSE:UNH), Inc. (NASDAQ:AMZN), FedEx Corp. (NYSE:FDX), Amgen Inc. (NASDAQ:AMGN), Anthem Inc. (NYSE:ANTM), Apple Inc. (NASDAQ:AAPL), and Baidu Inc. (NASDAQ:BIDU).

The fifth column from the left shows the stocks’ percentage move over the last seven days, and the seventh column shows how well the stock correlates to the SPDR S&P500 (NYSEArca:SPY), which is what I use to measure the markets, over the last 20 days.

With those two numbers, you can figure out how well a stock moves, and if it’s moving with or against the markets.

Once you have this list of stocks, you can run any number of screens and filters to assess which of these “Top Movers” would make the best option play.

For example, you can run a “percent to double” search on the stocks and see which one has an option that has the potential to double, then further analyze them to see which one requires the lowest percentage move in the stock price to double.

So from here, I can cross-reference this with my Money Calendar to find the best stock with the best option trade, with the best potential to double in value on the smallest move in the stock!

Here’s Your Trading Lesson Summary:  The second-biggest obstacle to options profits is a stock that doesn’t move. Here’s how to find the ones that do:
  1. Find stocks with options that trade in penny increments, or with a $0.05 spread between the bid and the ask (usually around 250 of the 2,500 optionable stocks);
  2. From there, search for stocks priced over $100, that move an average of 1% a day between the high and low, and that correlate with the market. That should leave you with a pretty robust list of quality stocks.
  3. Run a “percent to double” search to see if any of the stocks have a short-term ITM option with a chance to double. Then find the option that requires the lowest percentage move in the stock price to double.IMPORTANT – If markets are wild, option premiums may be much higher… employ the loophole strategy I have discussed before.
  4. IMPORTANT – If markets are wild, option premiums may be much higher… employ the loophole strategy I have discussed before.

Good trading,

Tom Gentile

11 Responses to “My Top 10 Stocks for Options Plays This Week”

  1. This is awesome stuff! Out of curiosity, how did the list match up against your Money Calendar?
    Also, I am curious where a company’s corporate officers are placing their money. SEC is supposed to publish this information. Do you look at this or is the data over rated?

  2. Trying to duplicate your Scanning process is not working for me. Can you give some instructions as to how you implement the scans you run on items 2. and 3 in your Lesson summary? I have the .cvs file downloaded but the sheet doesn’t look anything like your snapshot.
    Thanks, Matt

  3. The .CSV generated does not contain the information needed to do the additional filtering. In fact, the .CSV is dated 8/4. Also, I looked at the call options (OTM, ATM and ITM) for the 10 listed stocks for September, October, November, December and January (as available) and AAPL had the closest bid/ask spread of $0.10 for a few strikes and dates. A few other stocks had a 0.15 or 0.20 bid/ask spread. Most of the stocks were 0.30-0.60 and some didn’t were never that close. So, I think some of the details were omitted. It looks conceptually like great stuff and I would certainly be interested. Thanks – Jeffrey

  4. Concepts look great and I would also like to know how to perform the searches. CBOE list is dated 8/4 and lists 364 stocks. That list must be used as a filter into some other system. I couldn’t find it at CBOE. Also, the options for the 10 “whittled down” OTM, ATM, ITM Sept-Jan were never 0.05 for a bid/ask spread. The smallest I could find was AAPL for 0.10. Most bid/ask spreads were 0.35 or greater.

  5. I must concur with the other commenters: There’s no data source from the CBOE that shows the info you claim to use for your filters. Do you have another program that extracts the breakdowns from CBOE data? The graphics of your “search results” are nowhere to be found on the site from what I can see. Would appreciate any guidance here. It’s clear that the additional data are necessary for the system to work properly.

  6. Sorry guys so many articles I missed a few and the comments that went along with them.

    First, the CBOE penny issues can be found at

    Sorry about the confusion of where I go from there, sometime when an article goes from me to editing, some things might get lost. You wont find the ranking at the CBOE, and Optionetics platinum is NOT where you will find this list either. I have my own software at that ranks these BUT… heres the formula for you savvy investors who want to know…

    I take stocks > $100 that are moving at least 1% range for the past week, and rank those by who’s correlating the most to the SPY. Thats the list you see above… its that simple.

    Hope it helps and sorry for the delay… Happy Labor Day Weekend!

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