Hi all, a topic that I have looked into recently is piggy backing onto large order flows in the options markets. However a large option order can mean anything. Lets look at an example, TRIP had a HUGE put order go into the market today expiring tomorrow. This could be a market maker hedging it's over the counter trade, an institution hedging their long stock position, a vol arb fund looking to get exposure to the option and of course a directional play. I have access to a bloomberg terminal and can see what options are most actively traded, the time and sales of the option, insider buying/selling, who holds the most contracts, daily short interest, block trades and the largest share holders in the underlying. This info is all public information bloomberg just gives it to me in timely fashion and organizes it nicely. My question is, people like Jon Najarian seem to have made a fortune doing this in the early 2000's. But how can I get an edge piggy backing on an institution if all of this is public information. ASWELL How would a big buy order of one strike effect the WHOLE vol surface? Ps. If I was say a close friend to the CEO of TRIP and had inside information, I certainly would not be buying 50mm notional of puts. So can I really find the insider who has a net worth of 10mm and decides to throw down 100k notional on a trade?
70+% of order over 1000 contracts are not directional. Search the Edgar site for their study on QCC -qualified contingent cross and you'll see the work. What is most of it ? Hedges, vol. plays and layoffs from structured stuff. An account buying 2000 AMZN puts is more likely hedging than doing an outright directional play.
Bloomberg tells you the largest holders of contracts in the underlying.. I am home now but tomorrow I will upload the function for you. For example If I can remember Jane Street owns ~ 60% of all TRIP put options. They don't tell you if its long or short tho.
Thank you I will start reading it. There must be money in distinguishing between whose hedging and whose not, do you know of anyone who was able to do this successfully in modern times?
What your quoting from Bloomberg, I believe, is the 13F filing. Good luck using that data - they file oncee a quarter. You might want to look at Trade Alert's services. U.S. option markets only clear down to the broker. The only way to know who owns the positions is when a 13F filing occurs and under $100 million doesn't file. The art is looking at what trades with the option - not an easy task. Most big firms have built flow sniffers that look at and gather all that data and then a really skilled trader may want to translate that into a trade. Trade Alert does it pretty well for a paid service. Anyone with scale has a sniffer.
Yes that is correct. Is this legal? Like wouldn't the guy with inside info want to be more discrete when buying 50mm of trip advisor (assuming it was a directional play because of inside info). This honestly seems like a hopeless strategy unless you have the right infastructure. And the right infostructure must be expensive
13F was created just for that reason. Everyone with $100 million or more in 13F securities must file. Things like SPX and VIX are not 13F - otherwise it's pretty much all U S listed. Individuals can have a privacy carve out, but they still may be required to file - it just doesn't get made public. There are some other exceptions. Buy a service that does it for you. Look at the video link I posted under industry gossip and look at some of the folks who provide that kind of data.