How OptyTrades works
A transparent look at our approach -- what we analyze, how we think about stock selection, and what our signals mean. Our exact formulas and thresholds are proprietary, but we believe you deserve to understand the principles behind your data.
01The Wheel Strategy
The Wheel is a systematic options income strategy that cycles between selling cash-secured puts and covered calls on stocks you wouldn't mind owning. The goal is to generate consistent premium income regardless of whether the stock goes up, down, or sideways.
If the put expires worthless, you keep the premium and sell another put. If you get assigned, you now own 100 shares at a discount (strike price minus premium received) and begin selling covered calls above your cost basis. When shares are called away, you pocket the premium plus any capital gain, and the wheel restarts.
The key to success is choosing the right stocks -- that's where OptyTrades comes in.
02Building the stock universe
We don't use a hardcoded watchlist. We pull the entire US equities market — 8,000+ stocks — directly from the Securities Information Processor (SIP) consolidated feed across all 16 US exchanges, the same institutional-quality data used by broker-dealers.
From there, we apply hard filters to remove unsuitable names:
- Common stock only — no ETFs, ADRs, ETNs, warrants, or crypto
- Minimum price threshold — eliminates penny stocks
- Minimum daily volume (100K+) — ensures liquidity
- Minimum market cap ($300M) — micro-cap stocks almost never have liquid options
After that, we run an options availability filter. Every remaining stock's options chain is checked. We remove stocks with no listed options, very low open interest, or excessively wide bid-ask spreads (>40% of premium).
The result is typically 1,000–1,200 qualifying stocks — scored, ranked, and ready to trade.
Curated wheel watchlists
On top of the full universe, we maintain nine hand-curated watchlists pre-loaded in the screener. Every stock in these lists is audited against live market data on a rolling basis and must pass all of the following gates to stay in:
- IV ≥ 20% and IV Rank ≥ 20 — real premium, not a dead chain. You're being paid meaningfully above the stock's own historical volatility.
- Assignment Quality (AQ) ≥ 50 — our composite metric for “would you actually want to own this at assignment?” It weighs profitability, drawdown history, market cap, valuation, beta, sector, and dividend track record.
- Stock Score ≥ 65 — passes the fundamental Quality Score threshold.
- Wheel Grade ≥ C+ — confirms the options chain has enough liquidity, IV rank, and spread quality to be worth trading.
- Weekly options with deep open interest — confirms liquid, actively-traded chains rather than monthly-only or thin contracts.
- Tight bid-ask spreads — we exclude stocks where the spread is wide enough to eat a meaningful chunk of the premium you're selling.
- Minimum $500K daily average volume — ensures you can enter and exit without slippage.
The nine lists are: Wheel Under $25, Wheel Under $50, Wheel Under $100, Mega Cap Wheel, Dividend Wheel (dynamic, filtered live for ≥2% yield and ≥$10B cap), Buffett Quality, CANSLIM Growth, Dividend 50, and Deep Value 50. They appear in the screener watchlist dropdown and each has a dedicated landing page with thesis, criteria, and FAQ.
03Three independent scores
OptyTrades uses three separate scores that answer different questions — they never blend into each other:
| Score | Range | What it answers |
|---|---|---|
| Stock Score | 0–100 | Is this a quality company? Pure fundamentals only — profitability, P/E, EPS growth, analyst consensus, 52-week position, beta, and dividend. IV and options data play no role here. |
| Wheel Grade | A+ – F | Is the options market good right now? Options-only composite: liquidity, IV rank, earnings proximity, and bid-ask spreads. Does not touch the Stock Score. |
| Assignment Quality | 0–100 | Would I want to own 100 shares at assignment? Seven factors: profitability, drawdown from high, market cap, valuation, beta, sector, and dividend track record. |
Stock Score quality gate
One hard gate applies to the Stock Score before the final number is calculated:
- Falling Knife (drawdown ≥40% from 52-week high) — capped at 55. A stock in freefall is not a candidate for assignment, regardless of how strong the other fundamentals look.
04Safety Badge
A high Quality Score tells you a stock fits the strategy. The Safety Badge tells you whether it's safe to own. They answer different questions — and both matter.
Every stock that reaches Tier 2 analysis receives a Safety Badge based on 7 independent checks. This is a binary pass/fail system — no weighting, no curves. Either the company passes a check or it doesn't.
The 7 safety checks
| Check | What it tests |
|---|---|
| Profitable | Trailing twelve-month EPS must be positive. Unprofitable companies are dangerous to hold through assignment. |
| Valuation Sane | P/E ratio must be positive and below 60. Extreme valuations mean more downside risk if sentiment shifts. |
| Size Adequate | Market cap above $2B. Tiny companies lack the institutional support and analyst coverage that stabilize prices. |
| IV Not Extreme | ATM implied volatility below 80%. Very high IV means the market is pricing in serious risk — often for good reason. |
| Cash Flow Positive | Free cash flow must be positive. A company burning cash can't sustain dividends or buybacks, and debt loads become dangerous. |
| No Excessive Dilution | Share count growth below 5% year-over-year. Rapid dilution erodes per-share value — your 100 assigned shares are worth less every quarter. |
| Solvent | Debt-to-equity below 300%. Excessive leverage increases bankruptcy risk and makes the stock vulnerable to rate changes. |
Badge ratings
- 🟢 FortressAll 7 checks pass. Rock-solid company for the wheel.
- 🔵 Solid6 of 7 pass. One minor concern — still a strong candidate.
- 🟡 Caution4–5 of 7 pass. Notable gaps — investigate before trading.
- 🔴 Danger3 or fewer pass. Significant safety concerns. Think twice.
The Safety Badge appears on the stock detail page next to the Wheel Score and Options Grade. Each check is listed individually so you can see exactly what passed and what failed.
05Tier 2 -- Options intelligence
Tier 1 tells you which stocks are good for the Wheel. Tier 2 tells you whether now is a good time to trade them.
| Analysis | What it tells you |
|---|---|
| IV & IV Rank | We run our own Black-Scholes solver against option prices using ATM-weighted chain extraction across multiple expirations. IV Rank compares current volatility to the stock's own historical range — elevated IV Rank means premiums are richer than usual. IV data feeds the Wheel Grade only; it does not affect the Stock Score. |
| Options Liquidity | Aggregate open interest and volume across the entire chain reveals real market-maker participation. |
| Bid-Ask Spread Quality | We evaluate spread quality relative to premium size -- the ratio matters more than absolute width. |
| Financial Health | Multi-factor assessment: debt-to-equity, profit margins, and return on equity. |
| Bankruptcy Risk | Proprietary balance-sheet stress test to flag early warning signs of financial distress. |
| Intrinsic Valuation | Five sector-specific DCF models: Standard FCF (Tech, Healthcare, Comms), Cyclical FCF (Industrials, Energy, Materials), Dividend Discount (Utilities, Consumer Defensive), REIT FFO (Real Estate), and Financial (Banks, Insurance). Each model uses the appropriate cash flow metric, growth assumptions, and valuation guardrails for its sector — because valuing a bank like a tech company produces nonsense. All models use CAPM-derived WACC, three-stage growth projections, and conservative caps. DCF values are most powerful as a relative comparison tool. |
| Analyst Consensus | Aggregated recommendations and price targets for institutional sentiment. |
| Earnings Growth | Forward earnings estimates reveal whether analysts expect growth or decline. |
| Dividend Sustainability | Payout ratio analysis using free cash flow when available. |
| Institutional Ownership | High institutional ownership leads to more predictable price behavior and better liquidity. |
| Piotroski F-Score | 9-point fundamental quality score measuring whether profitability, leverage, and efficiency are improving or deteriorating. Uses trailing twelve month data to complement the Z″-Score's snapshot of current distress risk. |
Tier 2 results are presented as an Options Grade from A+ to F. The Quality Score tells you how good the stock is for the Wheel, and the Options Grade tells you how good the trade is right now.
06Entry signals
Every stock detail page includes CSP and CC entry signals generated from seven analytical dimensions:
- Momentum (RSI) -- identifies overbought or oversold conditions
- Price position -- price relative to the 20-day moving average
- Volatility bands -- Bollinger Band extremes signaling mean-reversion
- Pullback/rally depth -- drawdowns from 20-day highs
- Volume confirmation -- 5-day vs 20-day average volume comparison
- Structural trend -- swing-point analysis of higher highs/lows or lower highs/lows over 12 months of price data, confirmed by SMA(50)/SMA(200) alignment
- Support & resistance proximity -- distance to key price levels identified by clustering swing points within a 2% tolerance
CSP and CC signals are mirror opposites -- what's good for selling puts (pullback into support in an uptrend) is bad for selling calls, and vice versa. The composite score determines the signal with a deliberately wide neutral zone:
- GREEN Conditions favor this entry (high or moderate conviction)
- YELLOW Neutral -- no clear edge (most common signal)
- RED Conditions suggest waiting
07Strike reference levels
When entry conditions are active, OptyTrades displays three strike reference levels across different risk profiles, selected using Black-Scholes delta targeting within the 30–45 DTE theta decay sweet spot:
| Tier | Delta Range | Approach |
|---|---|---|
| Conservative | Delta 10–19 | Far OTM — lower premiums but very low assignment risk |
| Moderate | Delta 20–29 | Balanced distance and premium — the sweet spot for most traders |
| Aggressive | Delta 30–45 | Closer to the money — higher premiums and higher chance of assignment |
If the delta-based selection produces illogical strike ordering (due to unreliable IV on illiquid options), the system automatically falls back to OTM percentage buckets (Conservative 10–15%, Balanced 5–10%, Aggressive 2–5% OTM) as a safety net.
08Market context
The screener includes a Market Health Banner that shows the current regime of the S&P 500 (SPY) and Nasdaq (^IXIC). Each index is classified as bullish, cautious, or bearish using the same EMA Ribbon logic displayed on the stock charts — five exponential moving averages (8, 13, 21, 34, 55) checked for majority-vote stacking order.
Individual stocks also display a Trend & S/R card showing the stock's own structural trend (uptrend, downtrend, or sideways) and key support/resistance levels detected from swing-point clustering across 12 months of daily price data. Pivot levels can be overlaid on the stock chart as horizontal lines and diagonal trendlines, and a trend bar coloring overlay uses an EMA Ribbon (five exponential moving averages evaluated for stacking order) to highlight uptrend, downtrend, and sideways periods.
This context is informational -- it helps you understand the environment, but the entry signals already incorporate trend regime and S/R proximity into their scoring.
09Interpreting scores
The Quality Score (percentage) reflects Tier 1 fundamentals:
- 70+ Excellent Wheel candidate
- 50-69 Solid candidate with some weak areas
- <50 Weaker fit -- missing key factors
The Options Grade (A+ through F) reflects Tier 2 analysis:
- A+/A/A- Excellent options conditions
- B+/B/B- Good conditions, minor gaps
- C+/C/C- Average -- consider waiting
- D+/D/D- Below average
- F Poor -- illiquid or serious red flags
Verdict synopsis
Above the score breakdown, a Verdict card provides a plain-English synopsis of the stock's overall suitability for the wheel strategy. It includes a color-coded label:
- Strong 75%+ -- excellent across all key dimensions
- Good 60-74% -- solid with minor gaps
- Mediocre 45-59% -- mixed, notable weaknesses
- Weak / Avoid Below 45% -- significant concerns or too many red flags
The accompanying paragraph highlights key strengths, flags concerns, and summarizes options premium quality -- all derived from the same scoring data, translated into a human-readable narrative.
10Data sources
All market data is sourced from the Securities Information Processor (SIP) consolidated feed via Massive (formerly Polygon.io) — the same institutional-quality data infrastructure used by broker-dealers, aggregated across all 16 US exchanges.
- Stock universe — 8,000+ US equities scanned and filtered continuously throughout the trading day
- Prices & fundamentals — sourced from consolidated exchange data
- Options chains — full chain data including Greeks, bid/ask, and open interest
- IV & signals — calculated from option prices using our proprietary Black-Scholes solver
- Market health — broad market regime classification using SPY and Nasdaq
- Trend & S/R — computed per-stock from 12 months of daily price data
Disclaimer: OptyTrades is for educational and informational purposes only. Nothing on this site constitutes financial advice. Options trading involves substantial risk of loss. Always consult a licensed financial advisor before making investment decisions.