Understanding the mLabs Score
One of the most frequently asked questions we receive is about the mLabs Score that appears on each BORING Cash-Secured Put (CSP) candidate. Today, we want to break down exactly what this score represents and how you can use it to make better options trading decisions.
What is the mLabs Score?
The mLabs Score is a comprehensive 0-100 quality rating system that evaluates stocks based on multiple factors that are crucial for successful options selling strategies. This isn’t just a random number – it’s a carefully weighted algorithm designed to identify the best candidates for conservative options strategies.
The Components Behind the Score
The mLabs Score takes into account several key factors, including but not limited to:
- Trend & Momentum - Is the stock in a healthy uptrend or showing positive momentum?
- Stability - How consistent is the stock’s performance over time?
- Volume - Is there sufficient trading activity for good liquidity?
- Volatility - Is the implied volatility at reasonable levels for premium collection?
- Liquidity - Can you easily enter and exit positions without wide spreads?
- Earnings Timings - How does the expiration align with future earnings announcement dates?
- Additional Technical Factors - Various other metrics that contribute to overall quality
Each of these individual components is assigned a specific weight in the final calculation. Since I personally prefer boring, stable, and liquid stocks for options selling strategies, the algorithm is designed to reflect this conservative approach.
How to Interpret the mLabs Score
Understanding what each score range means is crucial for making informed trading decisions:
🟣 80-100: Excellent Quality
- Interpretation: Excellent overall health and quality
- Strategy: A great candidate for options selling strategies, especially in the 30-45 DTE (Days to Expiration) range
- Risk Level: Lowest risk for premium collection strategies
🔵 70-79: Strong Candidates
- Interpretation: Relatively strong fundamentals and technicals
- Strategy: Good for options selling, but be more selective with strike prices and DTE
- Risk Level: Low risk
🟢 60-69: Good with Caution
- Interpretation: Still a good candidate with some concerns
- Strategy: Requires more technical analysis and due diligence before entry
- Risk Level: Low to moderate risk
⚪ 50-59: Neutral Territory
- Interpretation: Neutral quality - not great, not terrible
- Strategy: Still tradeable but requires significant technical analysis and due diligence
- Risk Level: Moderate to high risk
🟠 40-49: Below Average
- Interpretation: Below average quality but may offer attractive premiums
- Strategy: Requires strong technical analysis and comprehensive due diligence
- Risk Level: High risk - proceed with extreme caution
🔴 Below 40: Avoid
- Interpretation: Poor quality candidate
- Strategy: Generally avoid selling options on these tickers
- Risk Level: Very high risk - not recommended for conservative strategies
Using the mLabs Score in Your Trading
Here’s how we recommend incorporating it into your workflow:
- Start with high scores (70+) for the safest plays
- Use lower scores (50-69) when you have strong conviction from additional analysis
- Avoid scores below 45 unless you’re an experienced trader with a specific edge
- Always combine the score with your own technical and fundamental analysis
Final Thoughts
The mLabs Score is designed to save you time by quickly identifying the highest-quality options selling candidates while filtering out the riskier plays. Remember, even stocks with excellent scores can move against you – this is why proper position sizing, risk management, and ongoing monitoring remain essential.
As always, this scoring system reflects our personal preference for boring, stable, liquid stocks that are ideal for conservative options income strategies. Your risk tolerance and trading style may differ, so use this as a tool to enhance – not replace – your own analysis.
Happy trading, and may your puts expire worthless! 📈
