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. Every time you load the screener, we dynamically scan multiple market categories in parallel -- capturing the most active, trending, undervalued, and high-growth stocks across the market.
After fetching, we apply hard filters to remove unsuitable names:
- US equities only -- no ADRs, ETNs, warrants, or crypto
- Minimum price threshold -- eliminates penny stocks
- Minimum daily volume -- 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 400-550 qualifying stocks, cached server-side for 15 minutes.
03Tier 1 -- Fundamental screening
Every stock receives a Wheel Score based on how well it fits the characteristics that make the Wheel strategy work. Tier 1 evaluates each stock across 8 fundamental dimensions.
| Dimension | Why it matters for the Wheel |
|---|---|
| Trading Volume | The single biggest predictor of options liquidity. Stocks that trade millions of shares daily have tighter option spreads and better fills. |
| Volatility (Beta) | The Wheel has a sweet spot: enough volatility for meaningful premiums, but not so much that assignment leaves you holding a stock down 30%. |
| Share Price | Price directly determines capital commitment. A $25 stock ties up $2,500 per contract; a $400 stock locks up $40,000. |
| Market Cap | Large-cap companies have deeper analyst coverage, more institutional support, and lower bankruptcy risk. |
| Dividend Yield | Dividends are extra income while holding assigned shares. A 2-3% dividend on top of option premium meaningfully boosts returns. |
| 52-Week Range Position | Stocks near all-time highs carry more downside risk; stocks at 52-week lows may be falling for a reason. We favor the middle band. |
| Earnings & Valuation | Profitable companies with reasonable P/E ratios are fundamentally safer to hold through assignment. |
| Analyst Consensus | A secondary confirmation signal. Strong buy consensus suggests institutional confidence. |
04Tier 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 |
|---|---|
| Implied Volatility | We run our own Black-Scholes solver against live 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 every dollar of premium has a statistical edge. |
| 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 | DCF analysis compared to market price. Stocks trading below fair value get a boost. |
| 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. |
Tier 2 results are presented as an Options Grade from A+ to F. The Wheel Score tells you how good the stock is for the Wheel, and the Options Grade tells you how good the trade is right now.
05Entry signals
Every stock detail page includes real-time CSP and CC entry signals generated from seven analytical dimensions:
- Momentum (RSI) -- identifies overbought or oversold conditions
- Trend 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
- Trend regime -- 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:
- GREENConditions favor this entry (high or moderate conviction)
- YELLOWNeutral -- no clear edge (most common signal)
- REDConditions suggest waiting
06Strike recommendations
When signals are active, OptyTrades suggests specific option strikes across three risk tiers:
| Tier | Approach |
|---|---|
Conservative | Further OTM with more time -- lower premiums but reduced assignment risk |
Moderate | Balanced distance and expiration -- the sweet spot for most traders |
Aggressive | Closer to the money with shorter duration -- higher premiums and risk |
07Market 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 based on price position relative to its 50-day and 200-day moving averages.
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. S/R levels can be overlaid on the stock chart.
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.
08Interpreting scores
The Wheel Score (percentage) reflects Tier 1 fundamentals:
- 70+Excellent Wheel candidate
- 50-69Solid candidate with some weak areas
- <50Weaker 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
- FPoor -- illiquid or serious red flags
09Data freshness
- Stock universe -- refreshed every 15 minutes from live market screeners
- Prices & fundamentals -- real-time market data
- Options chains -- fetched live when you open a stock's detail view
- IV & signals -- calculated on-demand from live data
- Market health -- cached for 15 minutes (regime classification doesn't change intraday)
- Trend & S/R -- computed per-stock from 12 months of daily data, refreshed with each detail view
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.