Best stocks for options trading

Screening Filters

1. Market Cap ≥ $10,000,000,000 (Large-cap stocks)

   • Purpose: Focus on larger, more established companies.
   • Rationale:
     • Large-cap stocks usually have deeper options markets: more contracts, tighter bid-ask spreads, better fills.
     • They tend to have more stable business fundamentals and broader institutional participation, which generally makes options pricing more efficient and execution smoother for active traders.

2. Monthly Average Dollar Volume ≥ $2,000,000

   • Purpose: Ensure the underlying stock is highly liquid.
   • Rationale:
     • High dollar volume means a lot of money trades in the stock every day, which typically translates into:
       • Tighter bid-ask spreads on both stock and options
       • Less slippage when entering/exiting option positions
     • This is critical for “best” options trading candidates, where execution costs can quickly eat into profits.

3. is_optionable = True

   • Purpose: Only include stocks that actually have listed options.
   • Rationale:
     • This is a basic but necessary filter: some stocks simply don’t have options chains.
     • Ensures all results are tradeable via options without the user having to verify availability themselves.

4. Option IV Rank ≥ 50

   • Purpose: Target stocks whose current implied volatility (IV) is relatively high versus their own past.
   • Rationale:
     • IV rank ≥ 50 means current IV is in the upper half of its historical range.
     • For many options strategies (selling premium: covered calls, cash-secured puts, credit spreads, iron condors), higher IV is attractive because:
       • Option premiums are richer
       • There’s more opportunity to collect time decay (theta) if volatility contracts or stays stable.
     • Even for buyers of options, elevated IV often signals there’s meaningful expectation of movement, which is what many traders seek.

5. option_unusual_activity = True

   • Purpose: Focus on stocks with unusually high options trading activity.
   • Rationale:
     • Unusual options activity often reflects:
       • Increased institutional interest
       • Anticipation of a catalyst (earnings, M&A, product news, macro events)
     • These conditions can create opportunities for short-term options trades due to shifts in volatility, volume, and price action.
     • “Best for options trading” often implicitly means “where option traders are actually active right now,” which this filter captures.

Why Results Match the Request “Best Stocks for Options Trading”

• The filters collectively prioritize liquid, large, actively traded underlying stocks, which is crucial for efficient options trading and minimizing transaction costs.
• They ensure options are available and actively traded, avoiding thin or illiquid option chains.
• By requiring elevated implied volatility and unusual options activity, they emphasize names where option pricing and volume are currently attractive, aligning with what many traders consider “best” environments for deploying options strategies.