How to tell if it options were bought instead of sold

Discussion in 'Options' started by nicbizz, Mar 25, 2010.

  1. nicbizz



    I see a lot of post talking about how a large amount of options for a stock is bought / sold on a particular day.

    This is a newb question, but how can you tell if the options were bought as opposed to sold? I mean, wouldnt there have to be a seller for every buyer?

    For stocks, I suppose you could tell based on whether the orders went off at the bid or ask. Is that the same thing for options? And is there a place where this information can be found?

    Thanks in advance.
  2. there is no way to know for sure - that I know of. The easiest way is to keep track of the open interest (the next morning).
  3. livevol would know
  4. options are zero sum. so it is bought buy the buyer, but the seller sold to the buyer.

    or do u mean if it was sold at the ask, thus bidded on, or if sold at the bid, thus sold on?
  5. nicbizz


    What I mean is, is some of the posts here, and even in option market newsletters, I frequently read something like "some bullish option activity in XYZ stock, with an investor buying 50,000 Sep 10 calls."

    How would we know it is a buy seeing as there must be a seller for every buyer?
  6. nickdes


    A buyer may have taken a bullish stance, but as stated for every buyer there is a seller who thinks there stance is correct....
  7. ya.. it is confusing. never have got a correct answer.

    there are 2 scenarios.. when.. MMs act like bookies.. ie. they just match the buyers and sellers. and take commision in the middle and get to eat the nice spread. between the bid-ask

    and the 2nd is. when they have to honor each bid ask. and someone comes in and swoops a large one.. I think they seldom will execute it in one swoop. rather . keep taking it .up. I have heard that MMs hedge their positions..

    for example if someone were to buy calls. they would by the equivalent STOCK...

    but that doesnot make sense. .as if the stock collapses. what do they do ?.. take infiinte losses... MMs , I just dont get it. how they make the markets and live off it consistently..~!
  8. has a ROBO put/call ratio that tells you aggregate numbers of retail only put and call purchases. But that's aggregate for the whole market.
  9. MTE


    In general it is thought to be the same as with stocks - trade on the ask means a buy, trade on the bid means a sell.

    However, in reality, there is no way of knowing for sure. There are just too many variables.

    Sure, if the option trades at the ask then it looks like a buy, but maybe the trade was shopped around and then just hit the tape at the pre-agreed price, which at the time happened to be the ask. And even if it was a buy then it still doesn't mean anything. You just don't know what else that person has. Maybe it was a hedge, maybe it was part of some spread, etc. In other words, you can't make any conclusions about the expectations that are behind some trade.

    And following open interest doesn't help much either. Open interest changes only if both a buyer and a seller open a new position or both close an exisiting position. In other cases open interest doesn't change.
  10. can we get a hint from IV?? when huge volume are bought, it'll inevitably drive up the IV.

    also, option buying is more for speculation purpose. when people think a stock is going to make a big move on the upside, they would rather buy call option than sell put. the same is true in the other direction.
    #10     Mar 26, 2010