The Optionetics Platinum site is a low-cost, completely web based, analysis and trade finding software tool for Stock options and Leap options.

Please read these Quick Start instructions before attempting to use the Optionetics Platinum web site. Even experienced option traders will need some help in order to take advantage of all of the Optionetics Platinum web site features.

These instructions are written to allow an experienced options trader to become "up to speed" on the use of the Optionetics Platinum web site as quickly as possible. The simplest way to accomplish this is to demonstrate how a user would attempt to find a new option trade for a given day. We highly recommend logging into the site and following this presentation by actually becoming an interactive participant!

• Start another Browser window and logon to Optionetics Platinum.
• As an alternative, print this help manual and start Optionetics Platinum using the link at the top of this web page.

NONREGISTERED USERS can participate by utilizing the web pages that are displayed on the Optionetics Platinum site. If you are online the stock site welcome link above is an example of the "Welcome Page". Do the following:

• Right mouse click the link and open it in another browser window.
• View the welcome page while reading the help manual web pages.

None of these links work in the word document help manual version.

We recommend you view these help manual web pages using Netscape 4.0+ or IE 4.0+. The help pages work in the AOL browser, but it's not recommended. Instead:

• Start AOL and minimize it.
• Then start IE 4.0+ or Netscape 4.0+

The FIRST STEP in the search for a new trade is to create an implied volatility ranking for a date, typically today. This ranking shows which stocks have options with implied volatilities that are either high or low RELATIVE to their past. If an option has an implied volatility that is HIGH relative to it's past; then the prevailing wisdom is to be a net SELLER. Likewise, if the converse were true, you would want to be a net BUYER.

The site currently has archived real option quotes back 2 years and 1 month. Any date in the past to 2 years and 1 month can be analyzed, ranked, searched and traded as if it were the current day. The date 06-01-99 has been selected to use as an example. The date needed by the user may not show up in the date selection lists. Picking a date not shown and setting your personal parameters will be discussed next.

Changing the dates shown on the Welcome Page date selector box can be achieved by changing values in My Personal Data parameters. CLICK on the "My Personal Data" link on the Optionetics Platinum Welcome Page. The button above shows an example of the My Personal Data parameters web page.

The My Personal Data parameters web page has several fields that are global to all programs: Your email address, historical data access start and end dates, an email flag, the risk free rate of return for the date in which you are interested (leave it at 5.5%), and other inputs.

• Select the start and end dates so that they "enclose" the date of interest, 06- 01-99. If 06-01-99 is no longer available, choose your own date and continue to follow along
• Choose the "My Dates, Access From" date to be 05-01-99 and leave the "My Dates access to" date at the value showed which should be today's date. As each day goes by the "access from date" also moves forward in your personal data set.
• Hit the "Save and Exit" button at the bottom of the My Personal Data web page.

Date changes can also be done directly on the Welcome Page by clicking the "All Dates" button

The set of stocks used in this example are for some of the high implied volatility stocks for 06-01-99. The next section will indicate how to find these stocks.

The welcome page is now in view.

At the top of the page select the Date to use as 06-01-99 or the one you selected.

Click on the "Create A Rank List" button.

The site loads a set of different rankings that can be used to help locate good trades. The Create A Rank List link above (for online readers) is an example of the ranking web page.

Our input to the ranker is the default "Top 500 stocks by volume" shown in the input line selection. The output of the ranking will be saved into Rank List 1, which is default. Rank List 1 is available as a choice in Create A Search. The Rank Lists make it easy to transfer stocks from the Create A Rank List to Create A Search for option trading analysis.

The search defaults to use the "7-150 days options" at the bottom of the web page. This means all options that expire between these two dates are used to find the high and low IV values. The first ranker type, percentiles implied volatility, will be used. The A option: "top category" governs the number of stocks saved. The percentile ranker categorizes the implied volatility into 20 categories, each 5% wide. The top category is the 95-100% rank.

The "A" output selection will be left at the top category. Only stocks in this category are placed in the rank list. As you delve deeper into the categories more stocks are placed in the list. However, these stocks are less likely to have the desired implied volatility properties. The default historical data setting, which is set at 6 months at the bottom of the page, will be used.

Please read the "Create A Rank List" Help Section on the Help Home Page to find out more about the Create A Rank List options.

CLICK the "Expansive Options" button. The rank request can take 1-3 minutes or more depending on net traffic and site usage. It's always best to filter the ranking using the lower bullish, bearish, explosive and quit buttons first. Then chain one rank list into another rank list looking for cheap and expansive options, saving fewer and fewer stocks. The lower buttons rank faster.

For example, you can significantly speed up Create A Rank List as follows:

Change the input to the top 1500 stocks by volume.

At the bottom, change the minimum and maximum prices to 20 and 90. Use the default Rank List 1 as output. Select 200 stocks for the B option. Change the 20 day SV/90 day SV to unity/unity and click the Expansive button located in that row. This is the fastest ranker and will filter down the 1500 stocks input to the top 200 by volume, between 20 and 90 in price, and place that list of stocks in Rank List 1.

Use the newly created Rank List 1 as the input into the Percentile IV ranker. The Percentile Ranker, which takes the most time to search, will have fewer stocks to search over. The input stock list also has more desirable characteristics.

Hitting the "Expensive Options" button in the Create A Rank List causes a high implied volatility ranking of stocks for the date requested, 06-01-99, to be generated and displayed. The link above shows the ranking result.

The stocks shown all have equal rank. This is determined by looking at the rank parameter on the right in the table. The stocks of equal rank are displayed sorted by volume. At the time this example was written, Intel, NORTEL and Pfizer were among the top stocks followed by other well-known stocks. 06-01-99 was a particularly high volatility day for many well-known stocks. As the stock list is updated, stocks that are no longer traded are removed from the stock list. They are also removed from the historical database. The data seen online and the data shown in the example files may not agree. Improving the historical IV data also changes the example data.

Each stock in the table is a link! Clicking on the stock link while in the Optionetics Platinum web site will take you to the Risk Graph where a plot of the price data for the date will be displayed.

One other feature worth noting is that the highs, lows and last in the table also have links. Clicking on a high or a low will also take you to the Risk Graph, but the date will be the date in the past when the high or low occurred! An option trade in the past can then be created and analyzed at the extremes in implied volatility. The example being used finds a trade among these high implied volatility stocks.

There are two methods to get the top Rank stocks into Create A Search.

• The easiest method is to use the top Rank stocks that are already loaded in the Rank List 1 portfolio that you selected on the Create A Rank List page.
• The next easiest method is to click on Edit My Rank List on the Welcome Page, and enter the symbols in the text box provided.
• The stocks in Rank List 1, already loaded by Create A Rank List, are used here.
• Users on the pay site should: Go to the "Welcome Page " and click on "Edit My Rank List".
• The stocks loaded into Rank List 1 are displayed.
• Click on "Welcome Page" at the top of the web page.
• Click on "Create A Search".
• Be sure the date is at 06-01-99 on the Welcome Page before hitting the "Create A Search" button.
• Click "All Dates" if needed.

The stock web page should now be in Create A Search, a statistical scanning trade finder. An example Create A Search screen is shown in the above link. The Create A Search help file discusses Create A Search's features and options.

• Select "Rank List 1" as the "Search for trades in" option. The date should be 06-01-99. If it is not, return to the Welcome Page using the top web page link.
• Select 06-01-99 as the date in the Welcome Page date selector and click on "Create A Search".

If you are following along in the Optionetics Platinum site, enter the Create A Search selections below:

• Checkmark the bullish high IV Call Vert Spread in the table on the bottom left side.
• Choose Expected Profit in the sorter below the table
• Uncheck the two "days to expiration limits" which turns them on!
• Change the days to expire at greater than 90 and less than 180.
• Uncheck the "minimum price option to sell" and the "volume must be greater than ". The later should be unchecked by default.
• "Combo should have all Real quotes" and "ABS(Model Profit) should be less than" should be default on.
• The strike variability should both be at 25% (default).
• Switch to the "Use Last or Split B/A "

The following is a summary of these choices: (Read the Create A Search Help file for more information.)

The implied volatility is high historically, so a high IV strategy was selected in the strategy matrix. A bullish option is being considered with limited risk.

A vertical call spread has been selected. A call with a strike has been bought near the close and selling a call with a strike 5 to 20 points above the close. If the put spread is selected, you would be selling the near put. If the price falls below the current close, there is a chance the put could be assigned and you would be forced to close the trade at a loss. In the call spread you are selling the far call. If it is exercised, there will almost certainly be a profit. Unlike the put spread, the vertical call spread far short call will not be assigned if the price falls below the current stock close price.

The problem with the call spread is that the trade must be closed to collect any profits and brokerage fees must be paid to get in and get out. If the price goes up in a put spread, the premiums are kept and no more trades need to be completed.

Nov. and Dec. options have been selected so the expiration dates have been set appropriately in the Create A Search temporal filters.

  "Expected Profit" has been chosen to rank the option trades. There are five primary choices: Probability of Profit, Odds, and Expected Profit, (which are somewhat unique to this web site) and High Reward /(-Risk) and Smallest Mask Risk. Try all five to see what happens in each case.

Probability of Profit finds the most likely trade to make money. Unfortunately, these trades often require that a lot of money be risked (the MaxRisk is high) to make a little money (the MaxWin is low).

Odds are the opposite. The Maxwin is higher than the loss and the better the Odds, the more this is true. Basically, Odds computes the probability of winning the trade and then computes how much money would be won. Odds then similarly computes how much money would be lost. The ratio of wins over losses is the Odds. High payoff, low risk trades generally rise to the top ranking using Odds. Usually, but not always, the probability is lower for a high Odds trade, so it is more likely that a loss will be encountered.

Expected Profit is a compromise between Odds and Probability of Profit. It is the money the trade will make, from a statistical probability point of view, if the stock price statistical volatility remains the same until expiration. Expected Profit takes the Odds calculated wins and losses and subtracts them. Both the Odds and Probability are high in these trades and often both the Maxwin and MaxLoss are high at the same time. Expected Profit is the option sorter used in this example.

Chapter 2 of the Optionetics Platinum help manual goes into more detail about Odds, Probability of Profit and Expected Profit, High Reward/(-Risk) and Expected Profit/(-Risk).

The next two options help filter out bad quotes:

First, Real Quotes is turned on (it should be defaulted as on). This means that a search will be made only in trades that are being traded and have quotes. When this option is turned off, Create A Search will use a model to price untraded options and also search among these for trades.

Next, Model Profit is turned on. This aids in eliminating bad quotes in Create A Search by checking to see when the model predictions and real quotes disagree too much. Quotes that disagree too much are not searched further by Create A Search. Read the Create A Search for more information.

The next three Create A Search options help us avoid searching in the thinly traded, far out of the money, options. The 12.5 price limit keeps you away from low priced stocks. The input list can also be filtered to be above a desired price as discussed above for Create A Rank List. The 0.125 option price and volume requirement allows the out of the money options to be avoided in the search. Setting these to higher values will further filter out thinly traded options. The stock price limit and volume are turned on.

The "Which Quote Do You Want to Use" option allows you to search the Bid/Ask data or the Last traded quotes. Switch to the "Use Last or Split B/A " quotes for this example. If an option does not have a last quote, the average between the bid and ask is used. This keeps the option values fresh at the latest trading (or potential trading) values.

Strike Variability is the amount the searcher is allowed to vary strike price away from the stock close price. If the option has more than one leg, such as a vertical spread, the leg closer to the stock closing price is the primary leg and the other option is the secondary leg.

• Name the Create A Search settings by typing a name in the text box in the left save button.
• Check the "save the criteria" box at the bottom.
• Hit the "Search 06-01-99" button.

The Create A Search output should match the results obtained by clicking the above link. The top line indicates the number of trades that were searched. Currently the limit is 2000 trades. You may sometimes see statements that say: stock ??? had no data. These can be ignored. The stock had no data for a variety of reasons and is handled properly by the program.

NOTE: If you do not get the ranking being discussed when performing the search, choose your own trade and follow along, or just look at the help example links to see what is being discussed. Optionetics Platinum updates to stock symbols and option historical data fixes are always ongoing causing the online data to change.

You may or may not want to pick the highest ranked option as your trade. There are other considerations such as: MAX RISK versus MAX PROFIT, in the money versus out of the money, directional versus non-directional, high probability versus low probability and liquidity. We will pick the first IBM combo, since we are familiar with the stock and IBM is in the technology group. We will analyze this trade. Your IBM trade and the one analyzed in this example may not match exactly, because of historical data updates. The MAX RISK for the trade is finite and okay, and the MAX PROFIT is about the same as the MAX RISK. We would prefer the MAX PROFIT to be double the MAX RISK. The odds are only about 1.2 to 1 in our favor. We would prefer odds above 2.0 to 1.

The trade is somewhat out of the money on the high side. This is shown in the "Composed of column". The strategy has two trades: a short (-1) OCT Call (C) option with a strike price of 120 that is selling for 8 5/16 and a long (+1) OCT Call (C) option with a strike price of 110 that we can buy for 12 3/4. The Optionetics Platinum web site has purposely excluded half strikes from its search. All half strikes with stale data (those that are thinly traded) always rose to the top of rankings and pushed out the good trades.

The option prices shown are the end of day option prices for 06-01-99. These option prices are not necessarily the prices you will get when you call your broker on 06-02-99 to make this trade. You can also check to see if the trade quotes might be bad. Bad data happens and sometimes rises to the top of a trade ranker. If the trade odds are reasonable, for example less than 10 to 1, it is an indication the option data is good, and a bad data check is usually not required.

Bad data can be recognized using the skew charts. The option skew charts can be constructed in the pay site. The pay site, unlike the free site, can reconstruct skew charts from the past.

• Go to the "Welcome Page".
• Make sure the date is 06-01-99 at the top.
• Enter the stock, IBM, in the stock text box at the upper right.
• Click on the "Create An Option Table" button.

Clicking the above link shows the table that appears in the Optionetics Platinum web site. No changes are needed in the table screen. The many options on the Table screen web page are discussed in the Table help pages.

• Click on the button "Create Tables" at the bottom of the Table Screen web page.

We are interested in looking at the OCT99 option quotes for strikes of 130 and 110.

• Go to the bottom of the page and find the "Today's Oct99 IBM IV Skew Chart".
• Look at the call IV's for the strikes of 130 and 110. The implied volatility for both strikes should fit the pattern of the other strikes. The IV's fit is good. A bad option data item would show IV's removed from the general trend.

When you try to fill a trade and the quotes are bad, you may discover that the brokerage real-time quoted prices differ from those on the web site, and the trade may no longer be attractive. This is the definition of a bad quote. A bad quote cannot be filled to make the trade otherwise its a good quote since you filled it.

• Click the "Recall Last Search" link at the top of the page.

Click on the link above to redisplay the example "Create A Search" web page.

For those following along on the Optionetics Platinum web site:

Click on the desired IBM strategy link in the Create A Search web page to go to the Risk Graph.

We can create or modify an option combination trade in the Risk Graph. Since we came from Create A Search, the Create A Search trade has been loaded and analyzed. The above link shows the IBM analysis Risk Graph.

The web site arbitrarily plots using 3 months of data. You can change the start date to any date in the chart parameters selection box. You can also change the plot vertical scale limits. Try changing the start dates and limits as desired and hit the "Update the chart NOW" button. The redraw is done on the server and sent back as a web page. The web site has no Java Graphics.

IBM has experienced a significant price increase during the Spring 99 bull run but is now off the high. The vertical spread plots versus time is shown on the right graph in the Risk Graph. The plot shows how the trade value will change depending on the movement in the stock. We will lose money below ~114.0, but not more than ~$450. We will make money above ~114. This is a % price change away in 136 days. Max profits are limited to $550. The trade is bullish.

Further down the page you can see the two trades that form the vertical spread. We bought a 110 call and sold a 120 call for a net cost of 12.75-8.31 = 4.44* $100 = $444. Stock option price multipliers to convert to dollars are always $100. Remember, $444.0 was the price for the cost of the spread on the Create A Search page.

The table in Graphics Analysis below the trade information is for more analysis. First note that the table is using Jun99 options, and we are looking at Oct99 options. The Risk Graph always defaults to the near month.

• Select the Oct99 option after the USE display.
• Click on "Update Option Trade" and the table will change to Oct99 analysis.

Note that the high IV bullish vertical spread probability does not match ours. This is because the table only uses the closest "At the Money" trade. Our trade is not the closest.

Click on "Save Report and Exit" to save the trade. It is now always online until you change or delete it.

We will now do an ASCII table analysis of the trade.

Click "Edit My Trades" on the Welcome Page web page. Make sure the date on the Welcome Page is 06-01-99. The result should be the web page shown by clicking the link above.

The IBM trade you saved is displayed. As each day goes by you can follow what is happening to your trade. You can delete it, copy it, analyze it or change its parameters. We are interested in the Tabular Analysis available further down the page.

The single day analysis is also shown using the above link. Possible values of IBM prices are in the column of numbers on the left. The vertical spread option value in dollars versus day's left is shown to the right of each price. The MAX RISK and MAX PROFIT are shown when there is 1 day left. Fine data analysis shows that we need to be close to 138 to make max profit on the trade.

Hit Browser BACK to return to Tabular Analysis.

We have entered a trade on a day that occurred in the past.

We can do Multi-Day analysis to see how the trade developed in time. This is a rare feature in options software.

In Edit My Trades choose Oct 18 1999 for the end day. This is the date that the option expired.

Hit the Multi-Day Analysis button.

The result is shown using the link above.

The Profit column shows end of day profit analysis using actual quotes. The MPROFIT column shows profit based on the option model. The trade is immediately profitable as IBM rallies. Sometime in September you might have considered taking profits as the option approached a $480 profit. However, the trade lost its value towards the end of the option and finished with a loss. Note that profitable traders exercised their options and active trading stopped ~5 days before expiration.

This shows the usual features of options. They can make and loose money rapidly. You must have exit criteria to take profits and not always wait until expiration. A spread that almost reaches max profit before expiration is a time to sell.

If you are reading the online help manual please continue by clicking on the following at the top of this Help Page: Platinum Help. Then click Chapter 4 - "Welcome Page".