Kinds of option trading activity
I will try and explain this, assuming a basic knowledge of the options market and the coinciding vocabulary. There are many web-sites that provide this information for free, and I will list them later. However, simply looking at volume is not all that it takes. I tend to compare the volume in a particular contract versus the prior open interest.
If the volume exceeds the open interest you know that new activity as opposed to closing open positions is flowing into the contract, and traders are taking their bets. You can also see if the volume was new by looking the next day to see the change in open interest.
A second way to come across unusual options trading is through a backward induction process. Basically, if you see a stock trading heavy relative volume or moving an unusual percentage amount, check the options in the front two months to see if anything catches your eye, and go from there. Another important aspect is looking for large lots or blocks of contracts that are purchased and the time of purchase, and www.
Large blocks often symbolize that large institutions are trading, and not just every day retail investors. Is it Option Buying or Option Selling? The way this can be done is to look at the Bid and the Ask on the contracts and watch to see where the last trade paying close attention to trade size price is, to see if traders are aggressive is selling the option hitting the bid or buying the option willing to pay the offer.
After that step you should have a good idea of what traders are betting on, as for movement in the underlying stock. I personally pay attention to the front 2 months of trading, but some people find success looking further out as well.
News, Events, Data There is usually a reason for the unusual options action, so pay attention to news releases and upcoming events such as earnings, FDA meetings, investor conferences, etc. This ensures the candidates will have fairly liquid options. The operator AND means only assets that satisfy both statements will be on the resulting report. This field contains a typically simple formula that specifies how you want to sort the report results how qualified items are listed.
No manual sorting required! This field tells OpScan what information you want on the report. In this report, the Put Dollar Volume and Call Dollar Volume for each of the qualified assets will also be displayed in the final report. This section allows you to select only those types of assets that you would like to consider. Max number of items in the report: You can choose to run OpScan formula s "Now" or schedule it to run however you like in the future.
A "Test Syntax" button allows you to quickly check your work to make sure it is valid. You can run as many formulas at a time as you want, or run them periodically throughout the day to find new opportunities. To start, simply check the box next to the formula s you want to run and click the "Go" button.
OptionVue 8 then sends the formula to run on our servers. A confirmation dialog box shows that the formula was accepted and the progress of your scan. OpScan is remarkably fast. A typical scan takes only a few seconds. When it is finished, the OpScan server sends its official report s to your OptionVue 7 software in a designated folder where they can be viewed or printed at your discretion.
Some Important Notes on OpScan Opscan can be used to scan the market based on data for both the underlying assets and their options. Some of the OpScan parameters are Underlying Specific. This means they pertain to individual assets.
Other OpScan parameters are what we call Option Specific. They pertain to individual options. If your Pick formula contains only underlying specific parameters, the result of your scan will be a list of assets. However, if your Pick formula contains at least one option specific parameter, then the result of your scan will be a list of individual options.
If OpScan finds nothing that satisfies your search criteria, the report will show the statement: No Qualified Items Were Found. Try another preferred or proprietary formula and search again - it only takes a few seconds. If the report lists fewer items than you asked for in the Max Number of Items field, it simply means only that many items qualified under your Pick formula. You can always try new variations and concepts to find what works best for your trading style!
OpScan provides great flexibility in locating good trade opportunities. There is a substantial risk of loss in trading financial instruments of any kind including stocks, futures and options. Clients should consider all relevant risk factors, including their own personal financial situation, before trading.