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Understanding the Options Screener Tool for Investing

Nathan BearNathan Bear ·

Investors know that selecting a good stock is never easy. The high volume of stocks to choose from, along with the immense amount of data found on the internet, doesn’t make the selection process any easier. In fact, it makes sorting out useful data from worthless information even more difficult. A stock options screener helps traders focus on stocks meeting their standards and suiting their strategy.

What Is an Options Screener

An options screener is an effective filter for when investors have specific ideas about the types of companies they want to invest in. With thousands of stocks available on U.S. exchanges alone, it’s not feasible to monitor and track them on their own. A stock options screener pinpoints stocks investors see to those meeting their unique sets of data. Option screener software has three essential components:

  • A database of stocks and companies
  • A collection of variables
  • An option screening engine that locates companies that meet set variables while generating a list of matching options to choose from

Using a Stock Option Screener

An effective options screener allows traders to search using just about any criterion or metric they wish. Once an investor inputs their information, they receive a list of stocks meeting those requirements. Using a stock options screen is relatively easy and starts by answering questions such as:

  • Do you prefer small-cap or large-cap stocks?
  • Are you searching for companies that have stocks that have fallen in value or stocks with prices at an all-time high?
  • What price-to-earnings ratio (P/E) range are you comfortable with?
  • Are you searching stocks within a specific industry?

By keeping the focus on measurable factors that affect the price of a stock, a stock options screener helps investors do quantitative analysis, or screening tangible variables including profit margins, volatility, revenue, and market capitalization in addition to performance ratios like debt-to-equity (D/E) ratio or P/E ratio.

Knowing What to Screen For

The most prominent challenge investors face when using a stock options screener is identifying what criteria to include in their search. With hundreds of variables to choose from, the sheer number of possible combinations is endless.

While options screeners are very flexible, if an investor doesn’t know what they are looking for or why they are looking for it, options screener software won’t be able to provide much help. Some options screener sites have predefined stock screens available for investors to use, which already have basic variables entered.

Some options screener sites offering predefined screens favored by experienced investors are listed below:

  • Yahoo! Finance offers three predetermined screens, including Portfolio Anchors, Day Gainers, and Undervalued Large Caps. Yahoo! Finance lists and explains the search criteria used for each screen to help users understand the underlying principles of each of the screens.
  • MSN Money includes several popular screens which can be furthered sorted and filtered by category.
  • FinViz provides a signal drop-down menu allowing users to filter criteria such as wedges, top gainers, and recent insider buying.

Watch Out for These Limitations

While a stock options screener can be a handy tool, they do have limitations that investors need to keep in mind:

  • The majority of options screeners only include quantitative factors, with many qualitative factors left to consider. No stock options screener provides information on things like customer-satisfaction levels, pending lawsuits, or labor problems.
  • Options screeners utilize databases that are updated on various schedules meaning investors must check the timeliness and relevance of all data. If an options screen is providing outdated or irrelevant data, the search could be meaningless.
  • Be aware of industry-specific blind spots like very few tech companies showing up when searching for low P/E valuations.

Do Your Research

While investors are often thankful for tools such as stock options screeners that can make life easier, it imperative to remember nothing beats doing individual research. Just because an options screener provides investors with a stock list that meets their criteria, it’s essential to take all this information with a grain of salt.

A stock options screener doesn’t know about news potentially affecting some companies. Investors need to use this information as a starting point and working from there. Take time to read up on any economic or legal issues affecting companies listed, anything that can make a dent in their bottom line.

Free Options Screener Options

Free stock options screeners are valuable resources for searching for the right investment as they can help narrow information and provide investors with a place to begin when selecting the best stock for them.

  • Yahoo Finance Stock Screener
    An excellent place for investors to begin their investment research with a home page providing detailed stock market information, including current market conditions being live-streamed for Standard & Poor’s 500 Index, NASDAQ, and the Dow. It also includes information on the value of the U.S. dollar against the euro and current oil and gold values.

    Once investors receive information on the current state of the market, they can continue to narrow their search by index membership and category before tightening it even further by entering specific share data, they are looking for, including dividend percentage and maximum and minimum prices. Finally, they can filter growth estimates, sales, and valuation ratios. Once done, the best matches are generated by clicking the “Find Stocks” button.

  • Fidelity Stock Screener
    Investors don’t need to be a Fidelity customer to use its very detailed options screener. While it does have a slightly higher learning curve, there are video tutorials available. In addition to the standard options like dividends and price, the Fidelity options screener provides investors with a list of the most popular search information other traders are using while letting them filter options based on the growth potential and company value. Fidelity also offers several predefined screens. Investors can click on a category to see the entire list of investments recommended.
  • CNBC Stock Screener
    CNBC’s stock options screener provides investors with the option to create custom screens or use predefined screens for steady performers, high dividends, and small-cap values. Criteria are organized into nine different categories, including performance history, analyst estimates, growth trends, and more with filters available for investors to narrow their search even more.

Paid Options Screener Options

If an investor is ready to get serious about trading, they need to find a great stock options screener with most experts agreeing that paying for an options screener isn’t a waste of money. Using a high-quality screener typically provides investors with high-quality results. Paid stock options screeners to consider include:

  • TradingView Stock Screener
    A web-based charting software, TradingView offers investors with excellent charts and a stock options screener with many fundamental and technical criteria combinations investors can use to located trading opportunities.

    Many investors like that TradingView covers world economic data, Forex, Futures, and International stocks. At least 39 International stock markets are covered, including several European countries, Japan, Singapore, Hong Kong, Australia, Canada, and the UK. Other useful features include a fundamental stock screener with an excellent range of fundamental criteria for investors to select from, a technical stock screener with several technical indicators to further refine a search, Forex screener, and Cryptocurrency screener.

  • Finviz.com
    Another web-based stock options screen, the Finviz.com screener, helps investors find potential stock trades easily and quickly. While charting software of the past usually only offered technical criteria for options scans, Finviz.com does an excellent job of combining both fundamental and technical data. An excellent tool for investors looking to do more in-depth research into stocks with features including premarket screener, ability to export scan results to excel, stock chart patterns screener, and financial and news statement links.

The Bottom Line

Stock options screeners are not a magic pill for finding the right stock and should never replace careful research and continued experience. For additional information on stock options and stock options, screeners download Jeff Bishop’s free eBook “Option Profit Accelerator” to learn how you can double or triple your account balance in just one week!

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