US008595123B1

(12) United States Patent (10) Patent N0.: US 8,595,123 B1 Zerenner et a]. (45) Date of Patent: *Nov. 26, 2013

(54) SEARCH CRITERIA TESTING 4,648,037 A 3/1987 Valentino 4,674,044 A 6/1987 Kalmus et al. Inventors: Ernest H. Zerenner, Wilmington, DE 4,774,666 A 9/1988 Miyao et al. (75) 4,823,265 A 4/1989 Nelson (US); Gregory James Zerenner, 4,846,687 A 7/1989 White et al. Newark, DE (U S); Michael L. Chupka, 4,870,610 A 9/1989 Belfer Newark, DE (U S) 4,878,843 A 11/1989 Kuch 4,961,139 A 10/1990 Hong et al. Assignee: Power Financial Group, Inc., 4,989,141 A l/l99l Lyons et al. (73) 5,101,353 A 3/1992 Lupien et al. Wilmington, DE (U S) 5,161,103 A 11/1992 Kosaka et al. 5,169,342 A 12/1992 Steele et al. (*) Notice: Subject to any disclaimer, the term of this patent is extended or adjusted under 35 (Continued) USC 154(b) by 0 days. FOREIGN PATENT DOCUMENTS This patent is subject to a terminal dis claimer. GB 2161003 l/l986 GB 2210714 6/1989 W0 WO 97/42591 ll/l997 (21) Appl. N0.: 13/465,325 W0 WO 98/09229 3/1998 (22) Filed: May 7, 2012 OTHER PUBLICATIONS Related US. Application Data U.S. Appl. No. 09/676,374, ?led Sep. 29, 2000, Zerenner. U.S. Appl. No. l0/607,4l8, ?led Jun. 26, 2003, Zerenner. (63) Continuation of application No. 11/ 820,952, ?led on Jun. 21, 2007, now Pat. No. 8,200,569. (Continued)

(60) Provisional application No. 60/815,966, ?led on Jun. Primary Examiner * Jagdish Patel 22, 2006. (74) Attorney, Agent, or Firm * Woodcock Washburn LLP Int. Cl. (51) (57) ABSTRACT G06Q 40/00 (2012.01) (52) US. Cl. A system for testing option search strategies comprises a USPC ...... 705/37; 705/35 repository of historical option data re?ecting ?nancial market (58) Field of Classi?cation Search conditions on a plurality of days in the past. The system is USPC ...... 705/35, 37 adapted to receive user de?ned search criteria for searching See application ?le for complete search history. the repository of historical option data for option investments, search the repository of historical option data for option (56) References Cited investments satisfying the user de?ned search criteria, and transmit the results. The system is further adapted to receive U.S. PATENT DOCUMENTS a request to use the user de?ned search criteria to search current ?nancial market data for existing investment oppor 4,209,845 A 6/1980 Berger et a1. . . 4,334,270 A 6/1982 Towers tun1t1e5~ 4,566,066 A l/l986 Towers 4,611,280 A 9/1986 Linderman 20 Claims, 11 Drawing Sheets US 8,595,123 B1 Page 2

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Launches ProSearch 5.0: Fast Stock Screening Soft 6,058,378 5/2000 Clark et al. ware Program Targets All Investors”, Business Wire, Jun. 1996, 6,064,985 5/2000 Anderson 6060617. 6,078,924 6/2000 Ainsbury et al. “Telescan, Inc. launches ProSearch 5.0: Fast Stock Screening Soft 6,226,623 5/2001 Schein et al. ware Program Targets All Investors”, Business Wire, Jun. 6, 1996, 3 6,317,726 11/2001 O’Shaughnessy pages. 6,321,212 11/2001 Lange “Telescan, Inc”, Futures, Jul. 1995, 46. 6,839,686 1/2005 Galant “ZDNet Introduces Inter@active Investor, Web’s Most Comprehen 7,024,384 4/2006 Daughtery, III sive Source of Financial News and Information on Tech Companies”, 7,035,820 4/2006 Goodwin et al...... 705/37 PR Newswire, Feb. 1998, 202. 7,165,042 1/2007 Segal et al. “Track Data Announces Its AIQ Systems Division Released Its 7,177,833 2/2007 Marynowski et al. Option Analysis Software Product”, Option Expert Business Wire, 7,212,997 5/2007 Pine et al 7,251,629 7/2007 Marynowski et al. 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(56) References Cited Rosen, “Fitting the Plan to the Person”, The New York Times, Nov. 16, 1986, Section 12, p. 40, col. 1. OTHER PUBLICATIONS Sahgal, “OLTP Spells Success in Time-Pressed ’90s”, Wall Street Computer Review, Jan. 1990, S42, Abstract. Dreyfuss, “How to Invest withYour PC”, Fortune, Oct. 1990, 211(3). Stern, “Trade in Your Old Way of Investing: With These Electronic E*Trade-research from Investors, www.etrade.com, © 1997 E*Trade ToolsYou Can Bring the Hottest Market Data Home Quickly”, Home Securit es, 7 pages. Of?ce Computing, Jul. 1993, 62, Abstract. Evan, “Power Options Plus”, Feb. 2002, 31(3), 56-57. Telescan, ProSearch Alerts, http://web.archive.org/web/ Financial Planning and Small Business Software for Individuals 19991110210901/telescan.com/telescaniprodiprolerts.htrn, Of?cial Quicken Site, http://guicken.intuit.com, © 2006 Intuit, Inc., accessed May 5, 2010. 10 pages. Telescan, ProSearch Alerts, http://web/archiveorg/web/ Foust, “Screening Stocks on Your PC Screen”, Business Week, Oct. 19991110210901/telescan.com/telescaniprodiprocrit.htrn, 1993, 142(2), Abstract. accessed May 5, 2010. Gianturco, “Investment Software: Broker in a Box”, Forbes, Inc., US. Appl. No. 12/823,203: Non-Final Rejection dated Jan. 5,2012, Apr. 8, 1996, 157(7), S82(1) 3 pages. 40 pages. Gianturco, “Using Your PC to Pick the Best Fund Finder. (Steele U.S. Appl. No. 09/676,374, Final Of?ce Action Dated Nov. 22,2005, Systems’ Mutual Fund expert, Telescan’s Mutual Fund Search, Value 5 pages. Line Publishing’s Value Line Fund Analyzer and Morningstar’s U.S. Appl. No. 09/676,374, Non-Final Of?ce Action Dated Dec. 1, Ascent, Principia and Principia Plus fund-picking programs) (Forbes 2004, 16 pages. ASAP) (Software Review) (Evaluation)”, Forbes, Oct. 1996, S41, 5 U.S. Appl. No. 09/676,374, Non-Final Of?ce Action dated Jan. 16, pages. 2007, 4 pages. Gold, “Pro?le Increases Range of Online Service”, Newsbytes, Jun. U.S. Appl. No. 09/676,374, Non-Final Of?ce Action Dated Jul. 5, 1990. 2007, 4 pages. Grinder, “An Overview of Financial Services Resources on the U.S. Appl. No. 09/676,374, Non-Final Of?ce Action dated May 27, Internet”, Financial Services Review, (no month available) 1997, 2009, 5 pages. 6(2), 125-140. U.S. Appl. No. 09/676,374, Non-Final Of?ce Action dated May 26, Hoovers Online, The Business Network, www.hoovers.com, 2000, 1 2009, 5 pages. page. U.S. Appl. No. 09/676,374, Notice of Allowance Dated Feb. 18, INVESToolsiTrusted Advice for Independent Investors, www. 2010, 7 pages. investools.com, © 2000, 4 pages. U.S. Appl. No. 10/607,418, Final Of?ce Action dated Nov. 24, 2008, Kan, “Street Smart 1.0”, MacWorld, Feb. 1995,59, Abstract. 19 pages. Kawamoto, “On the Street . . . Online”, New & Noteworthy, Jan. U.S. Appl. No. 10/607,418, Non-Final Of?ce Action dated Dec. 27, 1996, 2 pages. 2007, 11 pages. Merrill Lynch, www.newmlol.com, © 2001,15 pages. U.S. Appl. No. 10/607,418, Non-Final Of?ce Action dated Jul. 20, Moad, “Sabre Rattled”, PC Week Executive, Jan. 29, 1996, E1-E2. 2009, 23 pages. Ojala, “The Dollar Sign”, http://www.onlineinc.com/database, Aug./ U.S. Appl. No. 10/607,418, Non-Final Of?ce Action dated Jun. 6, Sep. 1996, Database, 82-88. 2008, 20 pages. Optionetics.com: An Investment Education Resource for Stock and U.S. Appl. No. 10/607,418, Non-Final Of?ce Action dated May 16, Options Traders, www.optionetics.com, © 1995-2006, 19 pages. 2007, 11 pages. OptionFind.com, www.option?nd.com, © 1998 Productivity Sys U.S. Appl. No. 10/607,418, Notice ofAllowance dated Feb. 5,2010, tems, 3 pages. 14 pages. OptionFind.com, www.option?nd.com, Feb. 24, 2000, 6 pages. U.S. Appl. No. 11/243,216, Non-Final Of?ce Action Dated Mar. 11, OptionMonitor, Your Source for Covered Data and 2008, 23 pages. Analysis, www.optionmonitor.com, © 2001-2006 Option Review, U.S. Appl. No. 11/611,043, Final Rejection dated Nov. 24, 2009, 7 Inc., 10 pages. pages. OptionsNewsletter: Stock Options made Easy, http://www. U.S. Appl. No. 11/611,043, Non-Final Of?ce Action dated Feb. 4, optionsnewslettercom, © QuoteMedia, 18 pages. 2009, 6 pages. OptionsXpress-Option Screener, www.optionsxrress.corn, Oct. 3, U.S. Appl. No. 11/820,952, Final Rejection dated Jul. 22, 2010, 7 2005, 4 pages. pages. OptionsXpress-Option Screener, www.optionsxpress.com,® 2000, 1 U.S. Appl. No. 11/820,952, Non-Final Of?ce Action dated Oct. 5, page. 2009, 7 pages. Poweropt.com, “PowerOptionsPiusiTool Menu, Easy Startup Weiner, “Software Packages for Investors”, Fortune, (no month avail Guide, Registration Page”, http://www.poweropt.com/toolmenu.asp, able) 1986, 114, 185(3). http:/iwwwpoweropt.com/startu129.uide.asp, http://v.ww.poweropt. www.msn.com, Home page, 2006 © Microsoft, 13 pages. com/pricingasp, accessed Dec. 13, 2011, 7 pages. www.optionsearcher.com, © 2001-2006 OptionSearcher.com, 5 PowerOptionsPlus.Com, The Best Way to Find, Compare, Analyze, pages. and make Money on Option Investments, www.poweropt.com, © www.poweropt.com, PowerOptions, Oct. 12, 1999 and Jun. 6, 2002, 1997-2002, 1 page. web.archive.org (Wayback Machine), 1-9. PowerOptions, First in WEB based interactive options search YahoolFinance, www.yahoo.com, © 2000, 2 pages. engines, http://www.poweropt.com, 2001, 1 page. Yakal, “Personal Investment Software, Investment 101”, PC Maga Price-Evans, “Investment Software: Plotting a Course on Zine, Nov. 19, 1996, 15(20), 341(9), 9 pages. Supercharts”, Investors Chronicle, Feb. 3, 1995. Your Finance Resource, www.investmentdiscovery.com, 2006, 2 Retkwa, “Financial Pages: You Can Now Obtain Investment Intelli pages. gence That Rivals That of Professional Traders”, Internetworld, Feb. 1996, 66(6), Abstract. * cited by examiner US. Patent Nov. 26, 2013 Sheet 1 0f 11 US 8,595,123 B1

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Figure 11 US 8,595,123 B1 1 2 OPTION SEARCH CRITERIA TESTING comes of combinations of option investment search criteria by running the search criteria against actual market data. CROSS REFERENCE TO RELATED Upon identifying a particular set of search criteria or search APPLICATIONS strategy that is found to be promising based upon the perfor mance on historical data, the user may apply the search cri The present application claims priority to and is a continu teria or strategy to ?nancial data re?ecting current market ation of US. patent application Ser. No. 11/820,952, entitled conditions in order to identify existing investment opportu “Option Search Criteria Testing,” ?led on Jun. 21, 2007, nities. This method of analyZing screening searches against Which application claims priority to US. provisional patent data re?ecting past market conditions is sometimes referred application 60/815,966 ?led on Jun. 22, 2006 entitled “Sys to herein as “back testing.” tem and Method For Option Back Testing,” the contents of all In an exemplary system, a repository of historical option of Which are hereby incorporated by reference in their data is created and maintained. The repository of historical entirety. option data is created by collecting, perhaps over the Internet The present application is related by subject matter to US. and from multiple sources, information on stocks, indexes, patent application Ser. No. 11/611,043 ?led on Dec. 12, 2006 and options. The ?nancial data is processed to derive values titled “Interactive Internet Analysis Method,” US. patent for a set of searchable screening parameters corresponding to application Ser. No. 11/243,216 ?led on Oct. 4, 2005 and entitled “System and Method For Searching For High Return stocks, indexes, and options. The ?nancial data and values for Option Strategies,” US. patent application Ser. No. 10/607, the searchable parameters are saved as a repository of histori 418 ?led on ?led Jun. 26, 2003 and entitled “Improved Sys 20 cal option data so as to be available for searching in the future. tem And Method For Analyzing And Searching Financial For example, the ?nancial data and values for the searchable Instrument Data,” US. patent application Ser. No. 09/676, parameters may be saved at the end of the day, at the close of 374 ?led on Sep. 29, 2000 and entitled “System And Method the markets, or at some other time. On days for Which neW For Analyzing And Searching Financial Instrument Data,” market data is available, and over a period of time, Which may US. patent application Ser. No. 09/524,205 (now US. Pat. 25 be several days, Weeks, months, or even years, the ?nancial No. 7,165,042) ?led on Mar. 13, 2000 and entitled “Interac data and calculated values for search parameters are stored tive Internet Analysis Method,” and US. patent application and maintained. Ser. No. 09/086,738 (now US. Pat. No. 6,049,783) ?led on A user de?ned search may be received to search the his May 29, 1998 titled “Interactive Internet Analysis Method,” torical option data repository for an option investment using the contents of Which are hereby incorporated by reference in 30 the ?nancial data and values for the searchable parameters their entirety. that have been stored over time. The user de?ned search may request a search for an option investment strategy such as, for FIELD OF THE APPLICATION example, a covered call, covered put, , bull put , bear call credit spread, bull call , bear put The present application relates generally to on-line ?nan 35 debit spread, calendar spreads, speculative buy calls, and cial data systems, and more particularly, to computer systems speculative buy puts, or any other option investment. Addi and methods for searching for option investment strategies. tionally, the user-de?ned search may de?ne the time period for Which the search should be performed. For example, if the BACKGROUND search is for a covered call, the request may specify that a 40 search be performed for a particular month and on a particular Systems and methods have been developed that alloW indi day in the past. An exemplary system may further alloW for viduals to use their oWn search parameters to search for the user to specify the end date for the search. This alloWs for ?nancial instruments such as, for example, stocks, bonds, specifying a period of time from start to ?nish so as to alloW stock options, and option strategies such as covered calls, tests of search criteria or strategies over certain periods of covered puts, spreads, etc. For example, US. Pat. No. 6,049, 45 time in the past. This enables evaluation of option strategies 783 entitled “Interactive Internet Analysis Method,” US. and search parameters for identifying those strategies over patent application Ser. No. 10/ 607,418 ?led on ?led Jun. 26, up, doWn, and neutral markets. The capability to specify a test 2003 and entitled “Improved System And Method For Ana time period alloWs the tester to evaluate a search strategy and lyZing And Searching Financial Instrument Data,” and US. investment opportunities over different market conditions. patent application Ser. No. 09/676,374 ?led on Sep. 29, 2000 50 One strategy may be better in an up market and another better and entitled “System and Method for AnalyZing and Search in a doWn market. ing Financial Instrument Data,” describe systems and meth The request is processed against the historical option data ods for searching for and implementing stock option strate base of ?nancial data and values for searchable screening gies. parameters that have been accumulated over time. For Existing systems are dedicated to alloWing users to search 55 example, in the situation Where the request had speci?ed a for option strategy investments using data that re?ects current search for covered calls, the database of historical data is market conditions. For example, users search current market searched to identify covered call investment opportunities data and values for screening parameters that are derived from that Were available during the period speci?ed in the request. that current market data to identify existing option invest The search may comprise calculating returns for the option ments that suit their investment interests. Applicants have 60 investment. sought to improve upon these systems. A list of option investments satisfying the user de?ned search criteria is identi?ed and formatted to be forWarded to SUMMARY the requester. Typically, the option investments are formatted in a list along With the appropriate details regarding each Applicants disclose systems and methods that alloW users 65 option investment. Depending upon the type of option invest to test screening searches against historical data. The systems ment that Was speci?ed in the request, the detailed informa and methods alloW users to analyZe and consider the out tion that is forWarded back to the user may vary. US 8,595,123 B1 3 4 The user receives the information at their Workstation and FIG. 8 depicts an illustrative data screen that may be can browse the results. The user may then request additional employed in an exemplary system to specify option screening information about one or more of the option investments that parameters; are presented. For example, the user may request additional FIG. 9 depicts another illustrative data screen that may be information regarding What Would have happened to one of used in an exemplary system to present results from a search the investment option positions had it been held until expira of historic option data; tion or some other date. Alternatively, the user may request a FIG. 10 depicts another illustrative data screen that may be group analysis of the option investments that Were shoWn to employed in an exemplary system to provide results from a the user. request for a detailed analysis of an option investment; and The request for additional information is forWarded back to FIG. 11 depicts another illustrative data screen that may be the server, Which processes the request to determine the employed in an exemplary system to provide results from a request for further analysis of a set of option investments. appropriate information. In the case that additional informa tion is requested for a particular option investment, the return DETAILED DESCRIPTION OF ILLUSTRATIVE for that particular option investment at different points in time EMBODIMENTS are retrieved. In the case that the user requested a group analysis for all of the listed option investments, the results are Illustrative embodiments of systems and methods for test retrieved for each of the option investments at the end of the ing option investment search strategies using historical option test period or other date speci?ed by the user. The results are data are described beloW With reference to FIGS. 1 through formatted and transmitted back to the user. 20 11. It Will be appreciated by those of ordinary skill in the art A user may further specify a portfolio of option invest that the description given herein With respect to those ?gures ments. Upon vieWing the results of a search against the data is for exemplary purposes only and is not intended in any Way base of historical option data for an option investment such as, to limit the scope of the potential embodiments. For example, for example, a covered call, a user may select to add a par While the exemplary systems and methods refer to testing ticular option investment to a portfolio. The request to add the 25 option search strategies for searching for covered calls, the item to a portfolio is forWarded back to the server, Which scope of the application is broader and includes testing and stores the information identifying the contents of the portfo searching for search criteria for other option investment strat lio. Thereafter, users may recall the portfolio or select a feW egies such as, for example, naked puts, spreads, butter?ies, stocks from the original screen and test it against historical etc. While the exemplary system is described With respect to data for performance. Also, users may select to update the 30 collecting, analyZing, and searching stock and stock option portfolio by adding or removing option investments to the data, the system likeWise could be applied to collect, analyZe, portfolio. and search data related to bonds, mutual funds, commodities, Users may repeatedly forWard search criteria to the system indexes, currencies, and their derivatives, or any other type of to test the criteria and investment strategies against the his instrument as Well. torical data. The user may modify the search criteria to ?ne 35 Applicants disclose herein exemplary systems and meth tune the search for intervals of time having market conditions ods that alloW users to test option investment strategies and that the user is particularly interested in. After testing the search criteria against actual past historical data. In an exem search criteria against the historical data, a user may request plary embodiment, systems are employed to test option that their search criteria be saved. The user may then use the investment strategies and search criteria for option strategies saved search criteria, having been tested against historical 40 involving call options and put options. A call option is an market data, to search ?nancial data re?ecting current market option contract that gives the holder the right to buy a certain conditions in order to identify existing investment opportu quantity (usually 100 shares) of an underlying security, such nities. as a stock, from the Writer of the option, at a speci?ed price Additional features of exemplary embodiments are (the ) up to a speci?ed date (the date). A described beloW. 45 is an option contract that gives the holder the right to sell a certain quantity of an underlying security to the Writer BRIEF DESCRIPTION OF THE DRAWINGS of the option, at the strike price up to the expiration date. Investment strategies related to put options and call options Other features of the disclosed embodiments are further include covered calls and covered puts. A covered call is an apparent from the folloWing detailed description taken in 50 investment Wherein a call option is sold While simultaneously conjunction With the accompanying draWings, of Which: holding an equivalent position in the underlying security. A FIG. 1 is a high level diagram of a netWork for providing covered put is an investment Wherein a put option is sold ?nancial data; While maintaining a short position on an equivalent amount in FIG. 2 is a diagram of a computing environment for use in the underlying security. When an option is purchased Without the disclosed embodiments; 55 oWning the underlying stock, the option is said to be naked. FIG. 3 is a block diagram depicting functional components Thus, a naked call is an investment Wherein a call option is of a server machine; Written Without oWning the corresponding number of shares FIG. 4 is a How chart of a process for retrieving ?nancial of the underlying stock. A naked put is an investment Wherein data over a netWork; a put option is Written Without shorting the underlying stock. FIG. 5 is a How chart of a process for calculating values for 60 The put option and the call option are basic ?nancial instru ?nancial screening parameters; ments to Which the exemplary system is directed. HoWever, FIG. 6 is a How chart of a process for servicing user the exemplary system is more sophisticated and provides requests for option investments offering the possibility of a greater assistance to investors by providing analysis of stock high return; option spread strategies, Which are investments that involve FIG. 7 depicts an illustrative data screen that may be used 65 simultaneous positions in a plurality of stock options. Spe in an exemplary system to enter a request to search historical ci?cally, the exemplary system assist users in identifying option data for option strategies; desirable option spread strategies such as the folloWing: bull US 8,595,123 B1 5 6 put spreads; bear call spreads; calendar spreads; collar source servers 108 may include data servers operated by Data spreads; spreads; butter?y spreads; and Transmission NetWork Corporation (DTN), Chicago Board spreads. of Options Exchange (CBOE), and Zacks Investment Research, as Well as others. DEFINITIONS NetWork 102 may be any electronic netWork including the Internet. User or investor terminals 112 provide users With A bull put spread is a spread strategy Wherein a ?rst put access to server 100 via netWork 102 and communications option is purchased and a second put option is sold, both device 104. User terminals 112 may be personal computers, generally having the same expiration date. hand-held computing systems, Wireless phones, or any other A bear call spread is a spread strategy Wherein a call option 10 suitable computing device. User terminals 112 are generally With a higher striking price is purchased and a call option With loaded With Internet broWser software such as Netscape Navi a loWer striking price is sold, both options generally having gator or Microsoft Explorer and are operable to communicate the same expiration date. over netWork 102 to doWnload data including Web pages from A bear call credit spread strategy is a bearish combination server 100. investment strategy Where the investor realiZes a pro?t by Brokerage server 120 is a server machine that provides a making cash from a net credit formed by the difference gateWay to an organiZation such as a brokerage house or betWeen the premium earned on a sold call and the premium electronic trading system that executes trades in stocks, stock paid for a bought call. While the stock goes doWn, the investor options, and the like. Brokerage server 120 provides an inter keeps the net difference in premiums. face to the brokerage or system through Which requests for A bear put debit spread strategy is a bearish combination 20 execution of trades are routed. Brokerage server 120 may be investment strategy Where the investor realiZes a pro?t When operable to interface With a trading netWork such as Nasdaq the value of a long put increases as the stock price drops. The or an electronic communication netWork (ECN) such as sold put helps to offset the cost of the long put and also Archipelago, and route trades to such netWorks. provides a ?nite maximum risk level. Generally, server 100 communicates With data source serv A bull call debit spread strategy is a bullish combination 25 ers 1 08 to gather ?nancial data related to ?nancial instruments investment strategy Where the investor realiZes a pro?t When such as stocks and options. After doWnloading ?nancial data the value of a long call increases as the stock price rises. The from the data source servers 108, server 100 calculates values sold call helps to offset the cost of the long call and also for various searchable ?nancial instrument-screening param provide a ?nite maximum risk level. eters. With respect to the exemplary embodiment, server 100 A bull put credit spread strategy is a bullish combination 30 derives returns for potential investments and searchable investment strategy Where the investor realiZes a pro?t by ?nancial instrument screening parameters that may be used to making cash from a net credit formed by the difference screen for stock options and indexes. Server 100 then stores betWeen the premium earned on a sold put and the premium the ?nancial data and the values for the searchable ?nancial paid for a bought put. While the stock goes up, the investor instrument screening parameters so as to have such data avail keeps the net difference in premiums. 35 able for responding to requests to perform back testing of an A butter?y spread is a spread strategy that involves com investment strategy. This collection of data may be referred to bining a bull put spread and a bear call spread Wherein four as a repository or database of option data. Users access server striking prices are involved, With the loWer tWo being utiliZed 100 over netWork 102 to search the database for option strat in the and the higher tWo in the . egies. Upon identifying a particular option investment strat A is a spread strategy in Which a short-term 40 egy, a user may issue a request to execute a trade on the option is sold and a longer-term option is purchased, Wherein investment strategy. The request is routed from user terminal each option has the same or different strike prices. 112 to server 100. Server 100 forWards the request over net A collar spread is an a spread strategy consisting of a Work 102 to brokerage server 120 Where the transaction is standard covered call, Wherein a call option is Written and the executed. underlying stock is purchased, and purchasing of a put option Server computer 100, data servers 108, brokerage server in the underlying company for doWnside protection. 120, and customer terminals 112 are generic computing sys A straddle spread is a spread strategy Wherein an equal tems. FIG. 2 is a block diagram of an exemplary computing number of puts and calls having the same terms are either system suitable for this use. As shoWn, computing device 320 purchased or sold. includes processing unit 322, system memory 324, and sys A strangle spread is a spread strategy involving a put option 50 tem bus 326 that couples various system components includ and a call option With the same expiration dates and different ing system memory 324 to the processing unit 322. The strike prices. system memory 324 might include read only memory (ROM) The disclosed system automatically derives returns for the and random access memory (RAM). The system might fur above listed stock option spread strategies and alloWs users to ther include hard-drive 328, Which provides storage for com search the return data as Well as other parameters to identify 55 puter readable instructions, data structures, program modules desirable investments. and other data. A user may enter commands and information FIG. 1 is a high level diagram of the exemplary system for into the computer 320 through input devices such as a key analyZing ?nancial data Which may be employed to service board 340 and pointing device 342. A monitor 344 or other requests to test user search criteria and investment strategies type of display device is also connected to the system for against historical option investment data. Server 100 is a 60 output. Communications device 343, Which may be, for computing system that collects, analyZes, and provides example, a modem, provides for communications over net access to ?nancial data. Server 100 operates as a database Work 102. Processor 322 can be programmed With instruc server and a hypertext transfer protocol server and may com tions to interact With other computing systems so as to per prise a single computing machine or a plurality of computers. form the algorithms and serve the Web pages described beloW Data source servers 108 are computing systems that oper 65 With reference to FIGS. 7 through 11. The instructions may be ate as repositories of ?nancial data. The repositories may received from netWork 102 or stored in memory 324 and/or include both public and private sources. For example, data hard drive 328. Processor 322 may be loaded With any one of US 8,595,123 B1 7 8 several computer operating systems such as, for example, stock relative to the Standard and Poor’ s 500 index; Windows NT, Windows 2000, or Linux. company nameiindicating the name of a company; Zack’s FIG. 3 is a diagram of the functional components of server indicator4denoting an industry classi?cation; and recom 100. As shoWn, server 100 comprises data collection server mended list4denoting a list of advisory service recommen 350, data computation/analysis server 352, database server dations. This data may be doWnloaded from one or multiple 354, hypertext transfer protocol (HTTP) server 356, and bro sites to server 100. kerage interface server 358. Data collection server 350 oper In an exemplary embodiment of the disclosed system, the ates to doWnload ?nancial instrument data from data servers ?nancial data is periodically doWnloaded during a trading day 108. Data computation/analysis server 352 operates to com so that the data and parameters calculated there from re?ect pute searchable ?nancial instrument screening parameters recent market ?uctuations. In one embodiment, for example, from the ?nancial instrument data. Database server 354 main the data may be updated every 20 minutes. HoWever, periods tains and provides access to the ?nancial instrument data and of greater or lesser frequency may be employed. For example, searchable parameters. Database server 354 maintains a ?nancial data may be updated continuously in real time. Thus, repository of ?nancial instrument data and searchable param as shoWn in FIG. 4, at step 416, it is determined Whether the eters to re?ect current market conditions and market condi ?nancial data should be updated. If the ?nancial data needs to tions in the past. A repository of historical option data may be refreshed, control returns to step 410. US. patent applica comprise ?nancial instrument data and values for searchable tion Ser. No. 10/607,418, the contents of Which are hereby parameters that go back days, Weeks, months, and even years. incorporated by reference in their entirety, discloses systems Database server 354 may comprise any of numerous com and methods Whereby even if ?nancial data is doWnloaded mercial database softWare systems such as those produced by 20 periodically, results from user-de?ned searches and requests Oracle Corporation and Microsoft Corporation. Database re?ect very recent market data. If at step 416, the data is not server 354 handles queries of the ?nancial instrument data ready to be updated, at step 418 it is determined Whether the and searchable ?nancial instrument screening parameters. market data should be stored for use in back testing, i.e. HTTP server 356 maintains hypertext mark up language testing option investment search criteria and strategies (HTML) pages, serves dynamic HTML objects, and provides 25 against historical data. For example, if the markets have fault tolerance and load balancing. HTTP server 356 may closed for the day, there may be no further updates and it may comprise any of several Well-knoWn HTTP server softWare be suitable to store the current data in the database of histori systems, such as, for example, the WindoWs NT server pro cal option data so that it may be accessed in the future. If so, duced by the Microsoft Corporation. Brokerage interface at step 420, the ?nancial data is saved so as to preserve it for server 358 operates to forWard trade orders for ?nancial 30 use in search strategy back testing. If at step 418 additional instruments. These orders may be forWarded to a brokerage data updates may be received, the system continues to Wait and/or to a trading system such as the Nasdaq or an ECN. It until the appropriate time to retrieve an update. should be noted that server 100 might comprise a single Server 100 uses the doWnloaded ?nancial data to derive computing machine or a plurality of computing machines. returns on option strategies and to calculate values for a Furthermore, data collection server 350, data computation/ 35 plurality of screening parameters. FIG. 5 provides a ?oWchart analysis server 352, database server 354, HTTP server 356, of this process. As shoWn, at step 510, server 100 uses the and brokerage interface server 358 may be comprised in a ?nancial data that Was previously doWnloaded to derive single softWare server and further may be located on a single returns on possible spread strategies such as, for example, computer system. As depicted in FIG. 3, servers 352, 354, covered calls, bull-put spreads, and bear call spreads as Well 356, and 358 are operable to communicate With each other as 40 as other screening parameters. US. patent application Ser. necessary. No. 10/607,418, the contents of Which are hereby incorpo FIG. 4 provides a ?oW chart of a process performed by rated by reference in their entirety, discloses details regarding server 100 for retrieving ?nancial data from data servers 108. various types of screening parameters for Which data may be As shoWn, at step 410 servers 100 establish a connection to calculated. Screening parameters that may be calculated by netWork 102 if one does not already exist. At step 412, server 45 server 100 may comprise, for example, the folloWing: per 100 issues a request to one or more data servers 108. The centage option volumeidenoting the ratio of the number of request identi?es to data server 108 Which data is being options contract traded that day to the average option volume requested. At step 414, the requested data is received at server over a de?ned number of previous days, eg 30 days; per 100. In an exemplary system, the ?nancial data that is doWn centage if not assignedidenoting the ratio of the sum of the loaded relates to stocks and stock options.Accordingly, in the 50 option bid and stock price appreciation to the difference exemplary system, the ?nancial data may comprise the fol betWeen stock price and option bid; percentage if assignedi loWing: stock symbol4denoting the trading symbol for stock denoting the ratio of option bid to the difference betWeen in a particular company; option symbolidenoting the trad stock price and option bid; percentage EPSG (Earnings Per ing symbol for a stock option in a particular company; stock Share GroWth)idenoting the ratio of the difference betWeen ask price4denoting the asked price or closing price of the 55 earnings last year and earnings this year to earnings last year; underlying stock; expiration/strike price4denoting the percentage rangeidenoting the percentage of range betWeen month a particular option expires and the price of the option; the year’ s high and loW for the stock Which is calculated as the option bid4denoting the highest price for a market sell order ratio of the difference betWeen the current stock price and the of a particular option; option volumeidenoting the number loW stock price for the year to the difference betWeen the high of options contracts traded in the current trading day; open 60 stock price for the year and the loW stock price for the year; interestidenoting the number of option contracts in the life percentage volumeidenoting the percentage change from of a contract; p/ e ratio4denoting the price to earnings ratio the previous day’s volume on the stock and calculated as the using last years earnings; average recommendationidenot ratio of the previous day’ s stock volume to the average num ing the average broker recommendation for a particular stock ber of shares traded in 60 days; percentage yield4denoting (a numerical rating With numeral 1 signifying the best and 65 the annual dividend yield on the underlying stock and calcu numeral 5 signifying the Worst); share4denoting the number lated as the ratio of four times the dividend yield per quarter of common shares outstanding; betaidenoting a measure of to the price of the underlying stock; deltaidenoting the US 8,595,123 B1 9 10 change in option price versus the change in stock price; parameters. Accordingly, users can locate an option or option Black-Scholes Ratioidenoting the bid price divided by the spread based upon percentage return and evaluate the return Black-Scholes value for the particular option; volatilityi in light of the investment risk as dictated by the other invest denoting the historical price volatility of the stock and calcu ment parameters. Having the return data available is espe lated by measuring the annual standard deviation of the daily cially useful to investors in assessing the risk verses reWard of price changes in the stock; implied volatilityidenoting the an investment. volatility based on the actual price of the option as opposed to Referring back to FIG. 5, at step 512, server 100 deter the historical price ?uctuation; and percentage to double mines Whether the ?nancial instrument data has been price4denoting the percent price movement in the stock updated. If so, the potential option investment returns and price to cause the option to double in price. other screening parameters are updated at step 510. If at step The calculated parameters are useful to potential investors 512, no updating of the screening parameters is necessary, at in deciding Which investments to make. For example, the step 514, it is determined Whether the current values for the Black-Scholes ratio provides an effective tool for comparing screening parameters should be saved for use in the future in investment values. Generally, Black-Scholes is a model for back testing. For example, in an embodiment, it may be options pricing. The Black-Scholes model uses information determined that there may be no further updates to the under such as the historical volatility of the underlying stock, time to lying ?nancial data as the markets may have closed. At step expiration, and the risk free interest rate to estimate a fair 516, the current set of instrument screening parameters are value for an option. In an exemplary embodiment of the saved in the historical option database so as to preserve it for disclosed system, the Black-Scholes ratio is calculated by use in back testing. Thus, in an exemplary embodiment, the dividing the option estimate calculated using the Black-Sc 20 system creates a database or repository of historical option holes model into the actual value of the option as determined data comprising ?nancial market data and values derived by the market. The ratio provides the investor With an indica from the ?nancial market data for search screening param tion Whether a particular option is under or over valued. The eters. The ?nancial data and values derived from the ?nancial ratio is greater than one if the option is over valued relative to market data re?ect market conditions on each of a plurality of the Black-Scholes theoretical value. The ratio is less than one 25 days in the past. if the option is under valued relative to the Black-Scholes Users at terminals 112 may issue requests to server 100 to theoretical value. The ratio information can be very useful to search the historical ?nancial data and screening parameters investors Who are considering buying or selling an option or for stock options and related stock option strategies using the spread strategy. methods as speci?ed in Us. patent application Ser. No. Option volume percentage is another of the calculated 30 ll/243,2l6, U.S. patent application Ser. No. l0/607,4l8, parameters. Stock volume has long been used as an indicator U.S. patent application Ser. No. 09/676,374, and Us. patent of stock activity but has not been as reliable With the advent of application Ser. No. 09/086,738, the contents of Which are derivative products such as options. Option volume provides hereby incorporated by reference. By searching against the faster feedback than stock volume on breaking neWs but historical ?nancial data, users can test search criteria and analysts are faced With the problem of deciding Which month 35 option investment strategies against actual market data. This or strike price to consider. The option volume percentage provides an opportunity for investors to test techniques and parameter employed in an exemplary system solves this prob hypothesis against actual market data. lem by creating an indicator, Which is the sum of all option A ?oWchart of an exemplary process for servicing user volume for puts and calls for all months. The aggregate num requests to test search criteria and option investment strate ber is a good indicator of this activity and is not as sensitive to 40 gies against historical data is depicted in FIG. 6. As shoWn in the time of the month relative to expiration or the closeness of FIG. 6, at step 610 a user’s request to perform a search is the stock price to the strike price. It is a more universal received. The request may be received at, for example, HTTP indicator of activity. In order to observe relative changes to server 356. The information comprised in a request may vary, this activity, the option volume for the day is compared to the but may comprise, for example, an identi?cation of an option average volume over some period of time, such as 30 or 50 45 strategy such as, for example, a covered call, covered puts, days average. The volume is measured as a percentage change naked calls, naked puts, bull put spreads, bear call spreads, from this average. strangle spreads, straddle spreads, calendar spreads, collars In addition to calculating the various parameters men spreads, and butter?y spreads. The request may further tioned above, the disclosed system also calculates returns for specify the period for Which it is desired to search the histori a plurality of different options and option spread strategies 50 cal market data including stored search parameters. The including covered calls, covered puts, naked calls, naked puts, request may also specify a beginning date and an end date for bull put spreads, bear call spreads, strangle spreads, straddle the search. Alternatively, default values such as the current spreads, calendar spreads, collars spreads, and butter?y date may be used for an end date. spreads. With respect to the covered calls and covered puts, FIG. 7 depicts a screen that may be used in an exemplary the return values include the percentage if assigned, Which 55 system by users to initiate a back testing search of historical represents the percentage return if the option is called, and data. The screen may initially be created at server 100 as an percentage if not assigned, Which represents the percentage HTML ?le that is transmitted to the user’ s Workstation. In the return on the transaction if the option is called. With respect to embodiment depicted in FIG. 7, the option strategy is selected the naked calls and naked puts, the percentage naked return is using a drop doWn menu. In the illustrative example shoWn, calculated, Which represents the return based on the 60 the strategy identi?ed is a covered call, but any option strategy requirements for the particular option. With respect to the can be selected. A user may further enter a search month, various spreads, the percentage returns are calculated Which Which is the month in the past for Which it is desired to search represent the maximum pro?t realiZed from the spread as a for the identi?ed strategy. The user may also select a search percentage of the margin requirement. day, Which refers to the ?rst day of tracking for Which screen It shouldbe noted that, With respect to all of the options and 65 ing parameters are applied. The screen may also alloW for the option spread strategies, the percentage returns are available user to specify an end date or “last day” for the search. The last as search parameters in addition to the many other search day de?nes the end of the holding period over Which the US 8,595,123 B1 11 12 returns are calculated, i.e. Retum:(Value on the last day Whether only options that correspond to covered option Value on search day)/Value on search day. opportunities that are “out-of-the-money” should be dis Users may further de?ne the particular screening values played. Both in-the-money and out-of-the-money results may that they Wish to have used to screen the database for possible be displayed together. Options corresponding to covered underlying stocks and their respective options that meet the options that are “at-the-money” are displayed regardless of criteria set by those parameters. In the exemplary embodi Which radio button is selected. ment, the screening values may be assigned a name so as to The screen presented in FIG. 8 provides the capability to alloW for easy access. In the embodiment shoWn in FIG. 7, the de?ne screening parameters for covered calls. It is envisioned saved sets of screening parameters appear in a pull doWn that a user could assign a name to the set of search criteria and menu. The particular value shoWn in the diagram of FIG. 7 is save the search for use at a later time. A user could de?ne titled “Initial ValuesiATM.” This title represents a set of multiple searches in this Way and retrieve the search for use at values for the screening parameters. a later date. Users can de?ne search parameters for a desired FIG. 8 is an exemplary screen that may be used to input the option strategy other than covered calls using screens similar desired values for the screening parameters. In the exemplary to FIG. 8, but With differences to account for the particular embodiment of FIG. 8, the values are those relevant to a option strategy. Search criteria that are tested against histori search for a covered call. HoWever, the parameters for Which cal data may be stored and later run against ?nancial data values may be selected may change depending upon the representing current market conditions to locate existing desired option strategy. As shoWn, users may enter ranges of option investments. values for numerous search parameters including the folloW Referring back to FIG. 6, after the user’ s request is received ing: percentage return difference; percentage if not assigned; 20 at server 100, at step 614, server 100 parses the user de?ned percentage if assigned; option volume; ; stock values to determine if the values entered by the user are price; option bid price; Black-Scholes ratio; delta; percentage logical and operable for searching the database. For example, option volume; including percent range for at step 614 server 100 might validate that a negative value is volatility; percent change in volatility; percent change in open not inputted for a screening parameter that cannot, by de?ni interest; percentage to double; percentage earnings per share 25 tion, be negative. Accordingly, if at step 614, it is determined groWth; price to earnings ratio; percentage of range betWeen that the values entered by the user are not valid, at step 616, the year’s high and loW stock price; average broker recom server 100 transmits a noti?cation of such to the user. If the mendation; percentage change in stock or option volume; user-de?ned values are valid, hoWever, at step 618, server 100 number of shares outstanding; the annual dividend yield on searches the database of historical option data for the period the stock; Which is a measure of the sensitivity of the 30 of time speci?ed in the user request for the option strategies security’s price to changes in the S&P 500; and volatility. that satisfy the user-de?ned values. This searching step may Users may also screen for options related to companies in a comprise further calculations such as, for example, calculat particular industry segment using industry segment pull doWn ing returns over the time period speci?ed in the user request. menu 810 or by Whether an option is listed in a particular At step 620, server 100 formats the results of the database organiZation’s recommended list using recommended list 35 search for vieWing via a Web broWser. The results include the pull doWn menu 812. Using pull doWn menus 810 and 812, list of stock options and/or stock option investment strategies users can limit consideration to options relating to stocks of a that satisfy the user-de?ned query. At step 622, the search particular quality and industry segment. It should be noted results, usually formatted as a Web page, are transmitted to the that in an embodiment, recommended list pull doWn menu user. may include one or more selections that are customiZed by the 40 FIG. 9 provides an illustrative Web page that may be used user to include companies that the customer ?nds desirable. to transmit the results of a search back to the requestor. As Using the recommended list pull doWn menu 812, ?ltering shoWn, the top portion of the page re?ects the search criteria and calculations can be restricted to the user’s customiZed that Were entered. In the particular example illustrated, the list. Also, using a sample moving average pull doWn menus search is for a covered call option strategy, With a search date 813, the values can restricted to stocks With a desired moving 45 of Apr. 27, 2006, using values for screening parameters saved average. Thus, the customiZed list can be applied to the With the name “Initial valuesiATM.” The user may elect to screening mechanism to optimiZe it and determine the best change the search criteria using, for example, pull doWn options to Write. menus such as those illustrated in FIG. 9. For example, the Sorting column pull doWn list 814 alloWs a user to specify user may choose to change the search date or period of time Whether the results should be sorted by the values in a par 50 that a search is to cover. In the exemplary screen illustrated in ticular search parameter including any of the folloWing: stock FIG. 9, the user may change the date using a pull doWn menu price; option bid price; option volume; open interest; percent or by clicking on the buttons labeled “prev” and “next” in age option volume; company name; percentage eamings per order to increment or decrement the search date. share; price to earnings ratio; percentage range; average bro The bottom portion of the screen illustrated in FIG. 9 kerage recommendation; percentage volume; shares out 55 provides a listing of the results from the search of the histori standing; expiration date; percentage yield; beta; volatility; cal data. The information that is presented for each option Black-Scholes ratio; delta; implied volatility; and percent to strategy may vary depending upon the particular option double. Sorting month pull doWn list 816 alloWs a user to investment strategy that Was speci?ed in the search, but gen specify Whether the results should be sorted by options com erally comprises information for evaluating the option invest ing due in a particular month. Order results radio buttons 818 60 ments that are listed. Information presented to the user for a alloW for the user to specify Whether the results should be particular option strategy may comprise the information that listed by value from high-to-loW or from loW-to-high for the is speci?ed for the various option strategies as speci?ed in selection made in sort by pull doWn list 814. In-the-money US. patent application Ser. No. 09/676,374, the contents of screen area 820 alloWs the user to specify Whether only Which are hereby incorporated by reference. In the embodi options corresponding to covered call opportunities that are 65 ment depicted in FIG. 9, the information re?ects a result for a “in-the-money” should be displayed in the list of options. search for covered calls. As shoWn, a list of 20 covered call Out-of-the-money screen area 822 alloWs the user to specify investments is shoWn. For each covered call, the folloWing