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Scanning for High Volatility Stocks | ThinkorSwim Stock Hacker
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Dec 17, 2022
In today’s video we’ll learn how to scan for high volatility stocks using the stock hacker in ThinkorSwim. This scan we’ll be mainly geared towards options sellers trying to find stock with high volatility to sell premium against. As an option seller, I am often trying to find stock that have high IV and ideally, stock towards the upper end range of IV rank. The higher the implied volatility (IV) for a stock, the higher the premiums are for the options contracts. As options sellers, we’re typically trying to pull in as much premium as possible. In this video we’ll be trying to create a short list of companies that pay significantly more premium than other underlying’s and attempt to puts volatility contraction on our side. Creating a scan for high volatility can save you time and deliver a short list of companies that match your criteria. You can also expand on this scan by adding fundamental filters or anything else you find important to refine this list further. In this video we’ll specifically go through adding a scan for Implied volatility, IV rank, Implied volatility vs historical volatility, and some additional stock filters to narrow this list down to more liquid underlying’s. This will all be done through the stock hacker on ThinkorSwim.
View Video Transcript
0:00
Hey everyone, welcome back to the channel
0:02
In today's video, we'll be going through creating a custom scanner to find some high volatility
0:06
stocks out there in the market. We're going to be doing all of this on the scan tab and specifically the stock hacker
0:11
within the Thinkersen platform. Now, to actually find these high volatility stocks, we're going to be creating filters
0:16
that scan for companies with high IV are towards their upper end range of their past
0:20
volatility levels, and we're going to go through adding some additional stock filters to hopefully
0:24
weed out some illiquid underlines, stocks that don't really trade much. At the end, we're also going to go through some of the steps to save the scan and how we can open it up later as a dynamic watch list going forward
0:34
Now, like I said, to actually create these scans, we've got to come up here to the scan tab and make sure we're on the stock hacker page
0:40
Now, I've already reset this page to the default, so this should look exactly how yours looks the very first time you come to this page
0:46
What you're going to see on the left here are three pre-made filters. Now, they're not really pre-made, but they're the defaults
0:51
You've got net change, volume, and percent change here. And if you wanted to add additional filters to this, you would just come up here to the top right
0:57
hand corner and hit add a filter. Now, once you click on this add a filter button, this is how you
1:02
can see all of the possibilities available to you, the things you can really search for, refine
1:06
this list down by. Now, the very first one you see in the list there, stock filters, that's going to
1:10
be really simple stuff. That's going to be based off things like stock price, like maybe you didn't
1:14
want to trade stocks less than 10 bucks, but also maybe $500 was a little rich for your blood, so you
1:19
wanted to avoid any companies that trade over $500 a share. Or maybe you also wanted to only trade
1:25
companies that have traded 200,000 shares or more so far today. Or maybe you find dividends very
1:30
important to you personally, and you wanted a company that did pay a dividend, and you wanted that dividend to be greater than, let's say, 2%. So again, the stock filters are going to be
1:37
really simple stuff, and we'll go through adding a couple of them just to refine this list down
1:41
further. The next one you see there is going to be options filters. Now, I'm sure a lot of you guys
1:46
coming to this particular video looking for high IV companies are doing so to find companies to
1:50
sell options against. So a lot of you might think, oh, I'm going to use some option filters, but that's not
1:54
really the case. These options filters are searching for things like, hey, I want only options
1:59
contracts that have, let's say, a delta of greater than 50, but less than 60, or have a
2:03
probability of expiring out of the money greater than 80%, but less than 90%. So these options
2:09
filters are really only going to be used if we're using the option hacker up here at the top, which
2:13
we are not using today. The stock hacker is used to find underlying stock. The option hacker is used
2:18
to find underlying options contracts themselves. So, for example, if we created this long list of
2:23
filters here, we hit scan, and let's say Apple meets all of our criteria. Well, Apple, the stock
2:28
would show up, AAPL. Now, if we had done that same thing in the option hacker, we created all
2:32
these filters, we refined the list. Instead of Apple coming up, it would show the Apple, let's say
2:37
1 October, 150 calls, meet all of our search criteria. Now, that's great for people who are very
2:42
experienced with using this option hacker, but for those of you who are new to this, I would say
2:46
start with the stock hacker, maybe later down the line you can move over to the option hacker
2:50
Now, the next one up there is going to be fundamental filters. That's going to be, for those of you who are maybe more long-term investors out there
2:55
Those of you who are looking for, let's say, a current ratio greater than one, or a cash flow ratio less than 15
3:01
Basically, anything that has to do with a fundamental ratio for the company itself, that's what a fundamental filter is going to be
3:06
Now, study filters is going to be another big one. That's where you're going to search for things like MACD
3:12
simple moving averages, RSI, that kind of stuff. It's also where we're going to create the high IV filters
3:17
as well as the IV rank filters later down the line. Now, the last one you see there is going to be pattern filters
3:22
that's going to be for if you're maybe looking for like a rising wedge pattern on your chart or a head and shoulders pattern, that kind of stuff
3:28
Now, to be honest with you, those of you who are using the scan page are probably going to spend most of your time using the stock filters and the study filters
3:35
Probably 90% of your filters or more are going to be those two. Now, since we already have three stock filters right up here at the top, let's go ahead and start with that
3:44
Now, like I said before, these are the pretty basic filters. So we're going to start with something like stock price
3:48
In my case, I don't want to trade any stock that trades below $10 a share and no greater than, let's say, $500 a share
3:55
Now, you saw that I clicked on that little drop-down arrow next to the word net change, and we're going to go ahead and scroll up until we find the word last here
4:01
And that just stands for last traded price. So we're going to go ahead and put in the minimum here 10 and the maximum box, I think I said, 500 in this case
4:09
Now, the next one we're going to leave in there. We're going to leave volume here. And we're going to say we want a stock that has traded at least 200,000 shares so far today
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And in my case, I don't care about having a maximum quantity, so we'll go ahead and leave that max box empty over here on the right
4:23
And the last stock filter we're going to go ahead and change is right here, percent change
4:27
We're going to actually go to market cap in millions right here
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Now, for those of you who don't know, market cap is just the size of the company. For example, Apple is like a $2 trillion company
4:37
Microsoft is like a $2 trillion company. Amazon's like $1.7 trillion. So it's the actual size of the company
4:43
The number of shares outstanding multiplied by the actual share price. So in my case, I'm going to go ahead and put a minimum of $500, which is $500 million
4:52
And hopefully that weeds out those really tiny microcaps that I really would never want to trade
4:57
So we can refine this list down a little bit further. And now that we got some of those basic filters out of the way, let's go ahead and jump into what you really came here for, searching for high implied volatility
5:06
So what we're going to do is come up here to the add a filter button once again. And this time we're going to come down to the study filter
5:12
And you're going to see that the default filter pops up for the study filter ADX crossover
5:16
we don't want to use that one, so we're going to go ahead and click on it. From there, you're going to see a drop-down menu with some pre-made filters
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ones that are very popular that you could use. Now, in our case, there isn't a pre-made filter for high implied volatility
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So we're going to come down here to the bottom to where it says custom. Go ahead and click on that. It creates a little pop-up window, which you can't see
5:33
so I'm going to go ahead and drag it down to this monitor. And right here, we're going to delete what is currently in here
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ADX crossover, because we don't want to use that one. Now, up here at the top, you're going to see that we currently have Condition Wizard highlighted
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ThinkScript is not highlighted. Now I will tell you that I am not a ThinkScript expert
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I cannot code to save my life. So we're gonna be spending our time on the Condition Wizard here
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which is kinda like the dumb down approach to doing this. But if we've got some coding savants watching this video right now
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the ThinkScript editor is where you can actually write out the code yourself to search for really
6:02
what you want to search for. Now later in the video I might go through how to edit some of the filters we about to add just slightly using the ThinkScript editor but it nothing crazy and it very easy to do But for those of you who are not coding experts like me we going to make sure we switched over to the condition wizard right here
6:17
Now, down at the bottom, we're going to go ahead and add a condition. You're going to see that another little pop-up window comes up
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and we're going to go ahead and select a condition. Now, what we're going to be scanning for in this case is we're going to look for companies that have implied volatility greater than, let's say, 45%
6:31
Now that's going to weed out companies like AT&T, Verizon, even Apple in this case
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And it's going to focus on those companies with implied volatility greater than 45%. So we're hopefully pulling in at least a decent premium when we're selling our options
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Now for this one, we're going to go ahead and start with a study filter because that's implied volatility
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So we're going to come up here to look up a study and go ahead and type in IMP for implied volatility
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You're going to see it's the second in the list there. We'll go ahead and click on it. We're going to come over here to the middle
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And remember we're saying is greater than 45%. So we're going to go ahead and select a condition now
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This one is going to be a value condition. And right here where it says 100, we're going to go ahead and delete that out and type in 0.45 in this case, which is 45%
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And we're going to leave this within one bar. So within the past day in this case
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Now that we're done with that, we'll go ahead and hit save. We're happy with the script. And this is the ThinkScript right here
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If we go to ThinkScript Editor, this is all that the code is written out. Implied volatility is greater than 45%
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And we'll go ahead and click OK since we're happy with that. Now, if I was to click on the scan tab right now, this isn't the greatest scanner currently
7:34
and you're going to see I've got a ton of results. 1,024 companies out there currently meet our criteria
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I don't know about you, but I do not have the time to go through 1,024 companies
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Now, they all do meet our criteria. They all trade between $10 and $500
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They all traded at least $200,000 shares today. They're all worth at least $500 million, and they all have implied volatility greater than 45%
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But since there's so many that meet our criteria, we want to refine this list down even first
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To find companies that are even more appealing, hopefully the odds are even more in our favor
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Maybe implied volatility is not only kind of high, 45%, but it's also high for the company itself
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Because remember, each company has its own, think of it like range where it's been the past year
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Let's go back to a company like AT&T. A company like AT&T typically has very low implied volatility
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Let's say the lowest they've been over the past year is 20%. The highest they've been is 40%
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So right off the bat, they don't meet our criteria. it. But let's say right now, the company had an applied volatility of 40%. That would mean
8:34
currently, its implied volatility is the highest it's been the entire year. Now, as an option seller
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we typically want to sell when implied volatility is high. And if we're selling options against
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AT&T when volatility is the highest it's ever been for this company, or at least in the past year
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we're hopefully putting implied volatility on our side, or Vega on our side, and can benefit
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from a volatility contraction, volatility decreasing. But we also won't want to trade a company like A&TT
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because even though yes, the volatility is the highest it's been for AT&T in the past year
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it's still very low compared against the overall market. So the next filter we're going to go ahead and add to narrow this list down even further
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is actually going to be Ivy Rank, which I think I kind of just explained is really like a gauge
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for each individual company, is the volatility high or low for this particular company
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comparing it to where it's been the past year. And like I said, we want to look for companies where not only is volatility high
9:25
it's high for this particular company compared to where it's been. So we're going to come up here to add a filter once again
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We're going to add another study filter. We're going to come over to ADX crossover, that default template
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Now, this one is actually already pre-made for us. We're going to come down to volatility in this case
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And we're going to find the one that says IV percentile. Now keep in mind, IV percentile is mislabeled in Thinker Swim
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I don't know why they have never fixed it, but it's actually IV rank
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There's nowhere on this platform that readily makes Ivy percentile visible anywhere
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But later down the line, I'll show you how to add like a little script into your chart so you can actually see it
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For those of you who actually want to see IV percentile. So let's go ahead and click on IV percentile here, which again is IV rank
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And in our case, we're going to say we're also looking for companies that are towards their higher end range
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So greater than, let's say, 35 percent and all the way up to 100 percent
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And remember, 100 percent would mean volatility is currently the highest it's been in the past year, the past 252 trading days
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Now if we go ahead and hit scan here, we're going to see this list get much. much, much smaller. We can see our list drop from over 1,000 companies all the way down to only
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398. Now, this list is still far too long. I don't have time to go through 398 companies
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so we'd want to refine it by adding more study filters, more stock filters, fundamental filters
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whatever it is we find important before we put on a trade. So maybe we're creating this list
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to sell put options, and we want to feel comfortable owning the underlying stock should it
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ever get assigned to us. So maybe fundamentals are actually important to us. So another filter we could
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add is we come up here to add a filter, a stock filter, and let's go ahead and add, let's do
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PE ratio in this case. And we're going to say companies with a PE ratio less than, let's go
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ahead and do 40, but also greater than zero. So let's put the minimum zero here. Now when we hit scan
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we once again refine that list by a couple hundred companies. We're no longer seeing any of those
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companies that are super high growth, but are still reasonably priced, at least all the way up to a 40
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PE ratio. And this is what I'm talking about, continuously adding filters to refine this list
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down as much as possible. Ideally, you're only going to have a few companies show up on this
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list, which means, hey, I'm ready to go. I'm ready to place a trade right here right now
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Now, down here at the bottom, you can see quite a few companies that meet our results. I'm sure we're all familiar with Alcoa, AA. And if we look through this list here, we can see it currently
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has volatility of 64.61%. But one thing we're missing here is that IV rank. Kind of want to see
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on the gauge, on the scale of things, how high is volatility right now compared to where it's
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been the past year? So what we're going to do is go ahead and click on this little gear icon here. customize, we're going to look up a column
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And remember this one is IV percentile. So we'll type an IV, scroll down a little bit, find IV percentile, add item
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We'll see it in the list over here on the right hand side and go ahead and hit okay. Now that we've got IV percentile over here on the right, we could actually
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sort these symbols of by IV percentile showing us those with the highest IV rank first And right off the bat we can see ASLE is at 99 So it volatility right now 80 let just say 85 is the highest it been over the past year
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So let's go ahead and visualize that. Let's go ahead and come on over to the charts page and throw in ASLE
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And you can see that I've already got implied volatility down here at the bottom
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And it doesn't look like it's got enough data really to plot this out effectively
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So let's go ahead and pull up a different symbol. Let's go back to the scan page and let's do Blackstone
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So BX, we can see it's currently at 95% IV rank, which puts its current volatility at 50%
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So even though most of the time we'd say 50% is not crazy high, it's actually crazy high looking at Blackstone
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This is basically the highest it's been over the past year. So once again, we'll come up to the charts page
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We'll throw in Blackstone BX here. And down at the bottom, we can see that chart of implied volatility
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Basically where implied volatility has been over the past year and we can see right here, 50% is right off the high
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In the past year, there was back in November a little bit of a spike in implied volatility here
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and it was slightly higher than it currently is. Now, we could also see this on the trade page
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If we pulled up BX, you can see that in the top left, and we went down to today's options statistics
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Up here in the top left-hand corner, you're going to see the 52-week high, 52-week low for implied volatility
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So you can see Blackstone Group's implied volatility has been as high as 51.9%
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but also as low as 18.2% over the past year. And currently, implied volatility is 50.2%, which is basically right at its 52EKai
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So as an option seller, if I was looking at this, I would be saying, well, it's far more likely
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than not that implied volatility is going to go down from here rather than going up. We're already at its high comparing it to its past year
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Now, implied volatility could expand from here. It could always go higher. Tomorrow implied volatility could be 60%, 70%
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We don't know. But when we're looking at this, we're saying it's far more likely than not that implied
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volatility is going to go down from here rather than expand further. So what I could do next is actually
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look through the option chain here, find the options that I typically sell. Let's say I'm typically doing
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30 to 60 days out. And we look at these five Novembers as our perfect trade. So we'll go ahead
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and click on that to expand it. We're going to go ahead and look at the strikes here. And let's say
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we typically sell like 30 delta options. That looks like it'd be about the 110 strike. And we look over
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on the right and we can see that these options look pretty illiquid. We can see the bid ask is 214 by
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320. So me personally, I would look at that saying, no way am I going to trade this. The bid-ass spread is
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way too wide. Even though Blackstone meets all of our criteria, these options are too illiquid
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I might be able to get into it, but if I want to get out early, it's going to be pretty difficult, at least pretty difficult to get out at a fair price. But that's what the scan tab is so
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great for, because I've got a whole long list of companies to go through, and I can do this pretty
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quickly. I could go to ATUS next, GSL after that, C-O-L, trying to find those companies that meet all
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of my criteria. Now, one thing we could also do to refine this list down further is refined by
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industry or refine also by optional stock. We never added a filter to make sure these companies
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actually have options associated with them. So one thing we could do is come up here where it says
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skiing in all socks. We could go ahead and click on that. From there, we could either go to
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category and actually say optional, which means this company actually has options associated with them
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The other thing we could do is come over to public R through W and go all the way down to weeklies
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This would mean not only do these individual stocks have options associated with them
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they also have weekly options, which typically only happens when they're fairly liquid stocks
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When people are already trading the monthlies enough to warrant actually creating weekly contracts for them
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So that's what we're going to do in this case. We're going to actually set this to weeklies. And right here, you can see I currently have 131 companies in my search criteria currently
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If we go ahead and it scanned, we should see that drop quite a bit. And now we're only seeing 16 companies that meet our criteria
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Now, this is a pretty reasonable list to go through pretty many. Now, let's say we also wanted to narrow this down to a certain sector
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Let's say we were pretty light in the tech industry and we wanted to focus on that. Maybe allocate a little bit more of our portfolio to tech
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We can come on up here to intersect with, come on down to buy industry
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We'll find the info technology sector and we'll select all information tech companies and hit
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the scan tab to refresh. And we can see here that only two tech companies meet our criteria and specifically chip manufacturers
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Now, you can always come back to this page. You can refine it from here, add filters
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maybe adjust the filters if need be. But what I like to do when I actually create a scan that I really like
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that I'm going to be using quite a bit going forward is I like to save it. And what saving the scan actually does is create a dynamic watch list automatically
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A watch list that is constantly updating. I don't put company names in it. I don't put Apple, Netflix, Microsoft
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I instead put a set of criteria. And in this case, I've got a set of criteria saying
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I'm only looking for companies that trade over 10, over 200,000 shares, have high implied volatility
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and high IV rank. So once I save this, the watch list is only going to show me companies that meet all of this criteria
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constantly updating every like three to four minutes, I believe, only showing me those companies that match my criteria
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If AMD no longer meets my criteria, it'll fall off the watch list. If Netflix now meets my criteria, it would show up on my watch list
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But it is a very useful tool that I could always keep up on my side panel. And hopefully when a company shows up on that list, I'm ready to put a trade on right then and there
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Now, to actually save this scan as a watch list, we're going to come up here to the three little lines
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in the middle, top right hand corner. From there, you're going to go ahead and hit save
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Cary. We're going to go ahead and name this as high IV stocks. And we'll go ahead and hit save
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From here, to access that scan, basically, that we just created or to access that dynamic watch list
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we'll come over to the watch list over on the left. From there, we'll go ahead and click on the name
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of the watch list we want to change. In this case, options. We'll come on up to personal, which is
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where all of our watch lists are stored. And we're going to go ahead and click on high IV stocks
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From there, you can see those same two stocks showed up, AMD and Western Digital
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Now, who knows what companies are going to be on this list five minutes from now? It's going to be constantly updating
18:09
But hopefully this helps you guys actually find stocks to trade. You're not just sitting there watching Microsoft all day, waiting for an opportunity
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You're only going to be looking at Microsoft because it showed up on your watch list right here. Now, this scan is not perfect
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There's no way to make a perfect scanner, but I really think it does the job. Now some things to consider which is what could really throw this watch list off is this Ivy Rank scan right here Remember I told you Ivy Rank is looking at basically this stock volatility over the past year
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which means if there's been a real skew in volatility because of some crazy event, it can throw
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off this scan entirely. Let's say AMD normally trades between an implied volatility of 50% and 100%
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But some crazy event happened which skewed or jumped volatility up, and let's say for a
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single day implied volatility was all the way up at 200%. That means for an entire year, while we're
18:56
factoring in that 200% implied volatility event, IV rank is going to be completely skewed because
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that is now your yearly high. So even though over the past year, the other 251 days of the year
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AMD traded between 50% and 100% IV, even if AMD was at 100% which, remember, if we don't consider
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that one day, that would be it's yearly high. It would say 50% right now, or roughly 50% because
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it's factoring in that huge volatility swing over the past year. Now, right now, we're no longer factoring in that huge spike in volatility back in the
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March, April, May time frame for COVID. But if that ever happens, I will show you a workaround
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What we can do is actually come to our scanner and specifically the study filter we created
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for Ivy Rank. We're going to come on over here to the little pencil icon. That's how we can edit it
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And what it's actually going to do is open up the pop-up window showing you the think script for the scanner we just created
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Now, on this list, you're going to see here that is currently. scanning back 252 days, which remember, that's 252 trading days, which is an entire year
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We could go ahead and change that to no longer look back an entire year, to only look back
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a month or two months or whatever it is that we want to do to get rid of that high volatility
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event that happened back in time. So let's say 90 days ago, there was some crazy event
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skewed volatility of the upside, and it was only a couple days that volatility was all the way
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up at those crazy levels. And again, that was 91 days ago, let's say. So if wanted to get rid of
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that event, we could go ahead and change these numbers right here. Let's say 252. We could change that
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to 90 days. So basically a quarter. And for some reason, it also goes back to the default of
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minimum of 16% IV rank max of 84. So remember, we set those, I believe, to 35% and 100%. So we'll go ahead
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and change those in here as well. And once we go ahead and hit OK, that completely changes the scan that
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we just created. Instead of looking back an entire year to calculate that Ivy rank, it's only looking
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back 90 days. So now when we hit scan, we're going to see a completely different result right here
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We're going to see that now first solar and sun powered now match our criteria where they didn't
20:59
before. Now, the only thing to still keep in mind is that this little column right here that says
21:03
IV percentile, that is still calculating it for an entire year. So what we're going to have to do is
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actually create our own column. But I promise you it's actually not that hard. We're going to use
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this as a reference. So come on over here to little gear icon, go to customize. We're going to go
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ahead and find it down here on the bottom where it says IV percentile. Click on that little script icon with a lock button on it
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I'll go ahead and move this so you guys can see it a little bit better. And all we need to do is go ahead and copy this script because this is going to be our template
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We don't have to reinvent the wheel here. So let's go ahead and copy that. Hold, go ahead and cancel out of this
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And what we need to do now is actually create our own. So we're going to go down to let me see what is it under
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Ah, here it is. And we're going to go ahead and change one of these. So we just opened up Custom One
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And before I do anything, let me go ahead and rename this as a as IV percentile 90, because this is going to be over 90 days
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And we'll go ahead and delete what's currently in here, simply moving average. This time we are going to click on ThinkScript Editor
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click inside the box and hit Control V to paste that script we just copied
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And the only thing we need to change is this right here from 252 to 90
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And this one as well, we'll change that to 90. And we'll hit OK and OK
22:10
Now we can see this new column on the right. Maybe I should have given it more of simple names
22:14
So we could actually see the 90 right there, but you can see that this calculation is now completely different
22:20
And you can see why it now matches our criteria, because normally you see first solar and sunpower wouldn't
22:25
First solar has only a 34.59 IV rank, and Sunpower is only at an eight Ivy rank
22:31
But if we only look back 90 days, the current volatility is actually quite high
22:35
if we're only looking back 90 days. Now, I also told you guys, I'm going to show you how to throw on IV percentile on your chart
22:41
not just Ivy rank. So let's go over to the charts page. and you can see I already have it up there in the top left team corner
22:47
Now, these are labels. So this label is currently showing me the IV for Blackstone Group in this case, 50%
22:52
showing me the IV rank is currently 95%. And IV percentile, the one that really everyone wants to know about
22:59
but it's nowhere to be found on Thinkerswim is currently 100%, which means 100% of the days back from today have been lower than the current IV
23:08
So let's say today's volatility is currently 50%. Every single one of the trading days before today have all been
23:14
been lower than 50%. And remember, as option sellers, we typically want to sell one volatility is high
23:18
so that's kind of a good sign. Now, in our example, Blackstone Group was way too illiquid for us to trade
23:24
but if we pulled up AMD, we could see if that one matches our criteria. Ivy rank greater than 50%
23:28
IV percentile greater than 60%. The IV in this case is actually pretty decent. So this would be
23:34
maybe one to look at. Now, to actually add those, again, we're not going to reinvent the wheel
23:38
We'll just come up here to the studies icon, and you can see I already have it right here
23:42
and here's the script. If you guys want this, just send me an email. I'll try and put this in the description
23:46
but I don't know how this is going to work. It's quite long, but this is the script you need to load
23:51
to actually see IV, IV rank, and IV percentiles, little labels in the upper left hand corner
23:56
And by the way, to do this, you would just copy this script right here. You would come down to create, to do it yourself
24:02
delete this little script that's already in here, Control V, name it, and hit okay
24:06
And you can also have this on your chart displayed this way. Now, I hope this video helped you guys out
24:11
I know it was a lot. We went through it fairly quick, but I think all these filters we added will actually help you guys find some really
24:17
volatile underlines that you might want to sell options against. Now, if you guys do have any questions at all, please leave them down below in the comments
24:23
I'll try to answer them all as best as I can. Please don't leave any specific thingscript questions unless it's something I can just copy and paste
24:29
I am terrible with it. In all honesty, absolutely terrible with it. But I hope you guys make some money this week
24:34
Hit me up with your questions, and I'll catch you all in the next video
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