Stephen Cooper Screening Criteria

     The stock candidate filter is used to find candidates for call options.  This filter requires that a stock's 6 month percent relative strength must be at least 90%, its 12 month EPS growth must be at least 80% and it should be within 5% of its 52 week high.  Since these are, by definition, momentum stocks, great leeway is given in their P/E ratios.  These stocks are typically priced above $50.  Finally, the stocks in this list should belong to a leading sector or industry. 

     A trading system may employ several trading templates.  A trading template consists of the systematic use of a number of technical indicators that flag or trigger trade entry and exit points.  Templates are designed to be simple to use, take up very little of a trader's time and give clear signals.  Many templates are applied to a specific trading time frame.  Trading at this site is based on Dr Cooper’s TTC-A trading template.  The template uses 3 technical indicators to enter a stock or options trade.  TTC-A is an acronym for trend, trigger and confirmation.  The A at the end is just a name to distinguish this template from others, B, C and so on.  I like to use the A as a reminder that one needs to “affirm” that the overall markets are moving in the proper direction just before a trade is entered. 

     A positive or negative slope of the 30 day SMA is used to determine a, respective, up or down trend (T).  The over sold (less than -80%) or over bought (greater than -20%) condition of the Williams %R indicator is considered a trigger to trade (TT).  Confirmation comes when the stock price closes above its 7 day SMA for a long trade or below its 7 day SMA for a short trade (TTC).  If no confirmation is received within 10 days of a trigger signal, the trade should be abandoned.  The affirmation comes the following day in that the overall market, as well as, the price of the underlying stock, must be moving in the intended direction of trade (TTC-A).  One of the things that make this strategy so powerful is a strong watch list.   A strong watch list provides a target rich environment and keeps us from chasing after the latest “hot stock tip”.

     Covered call writing involves the purchase of an underlying stock  Then a call option contract is written and sold.  The buyer of each call option contract has the right to call 100 shares of the underlying stock at the strike price.  For small investors, call options are best written when the underlying stock has a price below about $20.  This allows the call option sale to be a higher percent of the total for a modest capital outlay.   Aside from the $20 price cap, the stock screening is similar to that for Stephen Cooper Stock Picks, as explained in "Stock and Option Trading" .  Underlying stocks for writing covered calls are selected with the same care that one would exercise if he intended to hold the stock.

     Stock screen rationale for stock picks in the covered call lists are that their 6 month percent relative strength must be at least 90%, their 12 month EPS growth must be at least 80% and they should be within 5% of their 52 week highs.  Since these are, by definition, momentum stocks, great leeway is given in their P/E ratios.  Again these stocks are typically priced below $20.  Finally, the stock and option picks in this list should belong to a leading sector or industry.  Trading is based on Dr Cooper’s TTC-A trading template.  The template uses 3 technical indicators to enter a stock or options trade.  TTC-A is an acronym for trend, trigger and confirmation.  The A at the end is just a name to distinguish this template from others, B, C and so on.  I like to use the A as a reminder that one needs to “affirm” that the overall markets are moving in the intended direction of trade before entry. 

     A positive slope of the 30 day SMA is used to determine an up trend (T).  The oversold (less than -80%) condition of the Williams %R indicator is considered a trigger to trade (TT). Confirmation comes when the stock price closes above its 7 day SMA (TTC).  The affirmation comes the following day in that the overall market, as well as, the price of the stock of interest, must be moving in the intended direction of trade (TTC-A).  One of the things that make this strategy so powerful is a strong watch list.   A strong watch list provides a target rich environment and keeps us from chasing after the latest “hot stock tip”. 

    A good low cost introduction to Dr. Cooper's methods can be found in two books with a month of an advanced membership to his online options web site.

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