Ranking Spreads
With thousands of potential spreads available, how do you choose the best ones? FlashAlpha provides multiple ranking methodologies to match your trading style.
Overview
With thousands of potential spreads available, how do you choose the best ones? FlashAlpha provides multiple ranking methodologies to match your trading style.
Primary Ranking Metrics
Expected Value (EV)
Best for: Maximizing raw dollar returns
Raw expected profit per contract. Higher is better.
Rank by: Highest EV
EV Percentage (EV%)
Best for: Comparing across different position sizes
Expected value as a percentage of capital at risk.
EV% = EV / Max Risk × 100
A $50 EV with $500 risk (10% EV%) is better than $100 EV with $2000 risk (5% EV%).
EV per Day
Best for: Comparing across different time frames
Expected value divided by days to expiration.
EV/Day = EV / DTE
Useful for comparing a 30-day trade vs a 7-day trade.
Sharpe-like Ratio
Best for: Risk-adjusted comparison
EV divided by the standard deviation of outcomes.
Sharpe = EV / StdDev(Outcomes)
Accounts for variance, not just expected return.
Secondary Filters
After ranking, apply filters to refine results:
Probability of Profit (PoP)
- Conservative: > 70% PoP
- Moderate: 50-70% PoP
- Aggressive: < 50% PoP
Max Risk
- Set absolute dollar limits
- Or percentage of account
Liquidity
- Minimum open interest
- Maximum bid-ask spread
- Volume thresholds
Greeks
- Delta range
- Theta requirements
- Vega exposure limits
Ranking Presets
FlashAlpha includes pre-built ranking profiles:
Income Focus
Optimizes for:
- High probability of profit
- Consistent premium collection
- Lower variance
Growth Focus
Optimizes for:
- Maximum EV
- Higher risk tolerance
- Larger potential gains
Balanced
Optimizes for:
- Risk-adjusted returns
- Moderate PoP
- Reasonable holding periods
Custom
Create your own weighted ranking formula.
Multi-Factor Ranking
Combine metrics with custom weights:
Score = (w1 × EV%) + (w2 × PoP) + (w3 × Liquidity Score)
Example conservative setup:
- EV%: 40% weight
- PoP: 40% weight
- Liquidity: 20% weight
Example aggressive setup:
- EV%: 70% weight
- PoP: 10% weight
- EV/Day: 20% weight
Practical Tips
Don't Chase the #1 Result
The top-ranked spread might have:
- Poor liquidity
- Unusual circumstances
- Data anomalies
Always review the top 5-10 results.
Consider Diversification
Don't put all capital in the single best trade. Spread across:
- Multiple underlyings
- Multiple expirations
- Multiple strategies
Time Your Entries
High-ranked spreads may still benefit from:
- Better entry prices (limit orders)
- Waiting for IV expansion
- Avoiding earnings dates