Lance Ippolito is a pro-trader with the WealthPress organization. His years of experience have given him the knowledge to educate others on trading options.
Unusual options activity signifies a significant change in the market, and it is essential to understand it to trade it. Below, Lance Ippolito shares some of his knowledge on trading unusual options activity.
What Is Unusual Options Activity?
Unusual options activity is when trading volume grows higher than its average. It is deemed to occur when trading volume is about five times greater than the average daily trading volume.
It is also deemed to happen when the volume traded in an option exceeds the open interest for that day. Knowing about the options market is essential to understand unusual options activity.
Is Unusual Options Activity Worth Paying Attention To?
Unusual options activity signifies an uncommonly high interest in a stock. Although the trading volume for stock shares may be on average or below average, the trading volume in options contracts can still be higher than average.
Thus, the market provides another way to gauge its activity around a stock.
Unusual options activity can also mean a potential price movement. Generally, options trading requires you to be able to presume not only if stock prices will move but when the move will occur.
Paying attention to unusual options activity offers intuition about the movement’s speculated time.
How Do You Track Unusual Options Activity?
A simple way to track unusual options activity is to use an online scanner. Many websites update a current list of options contracts undergoing unusual options activity.
Another way to track unusual options activity is the social media app called Twitter.
This is because many co-traders publicize updates on unusual options activity on the app. Therefore, by following these accounts, you can receive their constant updates for insights on when an unusual options activity is occurring.
Best Unusual Options Activity Scanners
Some of the best unusual options for activity scanners include;
InsiderFinance Is a web-based trading tool focused on dark pool activity prints and options flow analysis.
The platform is easy to use and allows users to analyze opportunities, stocks, forex, and cryptocurrency. The platform also gives new subscribers access to a free InsiderFinance trading masterclass.
Optionsonar tracks all major option trades for any stock and categorizes them into bearish and bullish trades.
Optionsonar also scans for stock options activity where the contract volume has grown to be more than the opening interest from the previous trading day.
Tips On Trading Unusual Options Activity
When looking to trade unusual options activity, you have to be very careful. An option’s high volume might not always mean a movement is about to occur.
If various trades drive the book, traders might be piling to unusual options activity or simply overreacting to news of possible unusual options activity. It would help if you researched the potential catalyst for the increased volume. Afterwards, you can determine if there is a trade opportunity.