How to Use the Spread Hacker

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Video Transcript:

Hello traders, welcome to the thinkorswim tutorial and the six modules scan tap. In this lesson we are going to talk about the spread hacker on the thinkorswim platform. The spread hacker can be found here on the scan tab, by clicking “spread hacker”. Well the spread hacker actually is a lot like the stock hacker but the only and main difference is that this scan scans for spread options only. And right here if you click on this yellow arrow you can see that all the spreads that you can find with this scan, vertical, butterfly, iron condor, etc.

Spreadhacker thinkorswim platform

Right now we are going to focus on the vertical spread, because this is the most common spread strategy out there. And because this is not a strategy lesson, I’m going to use what’s most common out there to show you how this scan works. So we are going to go ahead and scan for these vertical spreads right now. All right so here we go, here’s the search results and as you can see, the first thing we are going to notice is that you can choose to show 50 per page, 100 per page. We are going to stick with 50, that’s fine. You can sort it by probability of profit and dates of expiration, the delta, the max profit, etc.

spread hacker

Let’s change it to be sorted by max profit to see what happens. And we are going to choose to sort it by max profit on an ascended basis. Let’s scan for them again. Okay, now here are the results and you can see that the max profit on this vertical spread is 1%, which is not very good actually, 2%. The probability of profit on this vertical spread on MLR is 1395. So we are going to sort it by descending max profit. Now this is more likely. You can see that on IOC we have…well that’s a 29,900% max profit probability etc.

So this is basically how you’re going to be, well, scanning for spreads. And as you already know, a vertical spread is buying a call or a put. And setting the same call or put on a different strike on the same expiration. Right here we have a show of vertical on TSO. And this is a show of vertical spread because we are going to sell the lower strike call near the money, and we are going to buy the higher strike call further out of the money. And as you can see, this is for the same expiration month.

But this really doesn’t matter because, well you have to know what a short vertical is in order for you to profit from it. One I want show you here on this video is how you’re going to analyze the probability of…or the risk profile on this vertical. You’re going to click on this blue circle right here and you’re going to go to “analyze trade.” And right here you can modify everything about the order, actually you can change this into a short vertical put spread just by modifying this. Remember that a short vertical put spread is the sale of a higher strike price and buying the lower strike price, and everything on the same expiration month.

spread analysis thinkorswim platform

And as you can see the probability of this spread being in the money changes when you modify the position and see related trade stamp. Now let’s go back to the scan and we’re going to try to modify the spread hacker by adding a fundamental filter to this. Let’s say that we want to filter out everything that doesn’t have the probability of profit at 75% higher. So you go here, well we already have the probability of profit right here from 0 to 100. So we’re going to modify that from 75% to 100%, that’s fine. Well actually we want to leave it like this and what we are going to do is we are going to add a new filter from day’s put to expiration. Or better yet, a positive delta, so let’s add the…from 05 ’till that. So let’s scan for new verticals, and there you go. We have the verticals that perfectly hit our criteria on this search result.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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