Saturday, July 14, 2012
If you’re interested in trading options, but haven’t been able to find an approach that suits you, give the Idea Hub a try. The Electronic Investor just got a sneak peek at this new tool from optionsXpress prior to its public launch.
Charles Schwab (ticker: SCHW; schwab.com) purchased optionsXpress last year, and Idea Hub is clearly a way for the big discount broker to persuade its customers to become more active options traders. It combines screening results from a variety of tools that have been available on optionsXpress (optionsxpress.com) for years, and suggests potential trades. The database of ideas is updated every 15 minutes during the trading day, based on real-time data, as well after the close of the market so you can put on some trades for the next open.
The Idea Hub groups trading ideas into two main categories: What’s Hot and Income. Within What’s Hot, there are two tools: Big Movers, and Earnings plays. Income includes its own twosome, Premium Harvesting and Covered Calls. The Big Movers category usually has the largest number of ideas, which are based on changes in open interest, volatility, money flows, or the number of shares of the underlying stock traded. The ideas within each category are further broken down into bullish, bearish, or neutral strategies. When we checked out the Idea Hub last week, there were over 300 Big Movers, just eight under Earnings, and approximately 40 in each of the Premium Harvesting and Covered Calls groupings.
You can browse through each idea group by using a drop-down menu to choose the type of screen. Under Big Movers, the drop-down even lets you separate stocks from ETFs and indexes, which is a nice touch. Next to the drop-down selector, you’ll see two slider bars that permit you to move from bullish ("Trade") to bearish ("Fade"), or shift the way the list of ideas is presented from a gallery view, in which the details of each potential trade are displayed in a box, to a list. The gallery view is more aesthetically pleasing, though you can sort the resulting ideas in the List view by clicking on a column heading.
The statistics displayed in each box—or pod, as optionsXpress calls them—vary according to the type of screen you’ve selected. For instance, if you select Premium Harvesting, the pods are displayed in descending order of return on risk. The top suggestion when we dug into the Idea Hub in this category was an iron condor (a four-legged options trade in which each leg has a different strike price); the trade was in Apple (AAPL), expiring in August and carrying a 19% return on risk. Covered calls are listed by their static return if unassigned, though you can easily change the display using the drop-down menus.
If you’re looking at an idea in the gallery view, you can hover your mouse over the particular box containing the idea and view the trade details and check out a profit-and-loss chart and probability analysis for that particular strategy. Clicking on “Trade” generates a trade ticket, which defaults to a market order; you can change that to a limit order and enter the price.
We found the Idea Hub engaging and educational. Schwab has a long-term goal of integrating the optionsXpress platform into its own technology; it recently launched a single sign-on process for customers who have accounts at both firms. In early May, Schwab also launched the Instant Money Move, which allows these customers to shift cash from one firm to the other. OptionsXpress CEO Joseph Vietri says, “We are still talking to our clients frequently, and their feedback feeds into our innovations.”
WE WERE ABLE TO VISIT briefly with optionsXpress’s co-founder and former CEO David Kalt on a recent visit to Chicago. He has moved his talents to the music business, having taken over the Chicago Music Exchange (chicagomusicexchange.com) in 2010. If you have any interest in vintage guitars, it’s worth a look. CME’s Fender specialist, Alex Chadwick, provides a walk through 100 rock ‘n’ roll riffs in a 12-minute video on the Website. It starts with Chet Atkins’s Mr. Sandman, from 1953, and wends its way to Cruel by St. Vincent, from 2011. It’s a most enjoyable rock ‘n’ roll history lesson.