OptionWeaver is a digital download that helps investors get started with selling options, including covered calls and cash-secured puts.
- A PDF booklet that lists over 50 stocks and ETFs that make great targets for selling options on when the price is right, including the stocks and ETFs I most-often sell options on.
- A streamlined Excel spreadsheet that helps you value stocks and figure out which options to sell.
- A PDF set of instructions for how to use the spreadsheet.
This tool lets you calculate the fair value of stocks in three different ways, as well as calculate the potential rates of return from option premiums.
It’s a streamlined spreadsheet model that keeps things fast and simple, and can be used on a variety of platforms. It has all of the calculators from StockDelver, plus two more for options.
I make several thousand dollars per year in option premium income and this is the tool I use to evaluate which options to sell.
It’s fast to use, and has five different calculators:
#1) Detailed One-Stage Model
This is elegant in its simplicity, yet powerful and flexible in its approach.
The hardest part about applying discounted cash flow analysis, or using any stock valuation method, is figuring out what growth rates to use. An output is only as good as your inputs are accurate, so if your forecast is off and you put bad numbers in, you’ll get bad numbers out.
This framework makes it easy to segment the growth estimate into individual parts, so that you can approach them individually and come up with an accurate estimate.
Here’s an example of what it looks like:
You start with top line growth, and work your way down from there, variable by variable, using recent company history, investor presentations regarding management plans and goals, or any other data you have available, to determine how the performance might play out over the coming years.
The output area automatically calculates a result for you, based on your inputs.
I like to use this tool for sensitivity analysis as well. Once you have a valuation estimate, you can see how negative impacts to pricing or growth or anything else can affect how your investment will turn out.
This helps you identify risks ahead of time.
It works on just about any type of publicly-traded company, whether they pay a dividend or not.
#2) Simple Two-Stage Model
The simple two-stage model cuts right to the chase and lets you calculate the fair value of a stock based on changing growth rates:
This is great for fast-growing companies that will necessarily be slowing down in a few years.
#3) Dividend Discount Model
Next, the spreadsheet has a dividend discount model sheet for high-yield companies:
I cut the output picture short because it’s a long image.
This model is great for REITs, MLPs, or any high-yielding dividend stock. You don’t need to use a 10-year sale multiple like the others; it calculates the sum of perpetual discounted dividends for you.
#4) Graham and Lynch Formulas
Lastly, the calculator includes a page for modified Graham and Lynch formulas:
It calculates the original Benjamin Graham formula as well as his modified version for various interest rate environments. In addition, it calculates a dividend-adjusted P/E/G ratio, which is a modified version of Peter Lynch’s popular valuation approach.
The instructions walk you through each of these methods step by step and explains how they work.
#5) Put-Selling Calculator
This calculator lets you enter the stock price, strike price, bid premium, and expiration, and then it calculates the rate of return of the option under different scenarios:
It shows what will happen whether the option is exercised or expires, shows the potential rate of return over the lifetime of the option and on an annualized basis, and provides a chart comparing selling the put (Put RoR) to simply buying the stock outright at market prices (Base RoR) over a range of stock prices during the lifetime of the option.
#6) Call-Selling Calculator
The final spreadsheet does that for covered calls:
Platform-Independent and 100% Unlocked
Although this is an Excel (.xlsx) file, it can be opened and used on most spreadsheet programs, including free ones like Open Office.
You can even upload it to Google Drive and use it on the cloud like a web application.
I chose not to lock or hide any of the cells. You can see all the formulas if you want, and you can customize the spreadsheet file to suit your needs.
Stock and ETF Booklet
Some stocks and ETFs are great for selling options on, while others are not.
In addition to the calculator and instructions, OptionWeaver comes with a PDF booklet that explains the three most important attributes of a security that makes it a good target for selling options on, and then lists over 50 example stocks and ETFs that have all of those attributes.
It’s the list of stocks and ETFs I most often refer to when deciding which securities to sell options on, and serves as a good list for getting started.
OptionWeaver is available as a digital download for $14.95.
It includes the Excel calculator (.xlsx), and comes with a 27-page detailed PDF tutorial on how to use it to value stocks and calculate option premium returns, as well as a 30-page booklet that shows readers which types of stocks and options are good for selling options on, along with over 50 examples of stocks and ETFs that are great securities for option-sellers, and that I tend to sell most options on myself.
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Download OptionWeaver below: