I was reading through some of my e-mails , and came across an article in which one of them definitely caught my attention .... it is regarding , stocks with " Unusual " Options Activity I really like the premise of it, and think that .... finding stocks with this type of Unusual activity, when used with Technical Analysis of that Stock at hand's char(s) via Price Action , that this could lead to some nice trading opportunities in buying regular Long Calls and Puts Any insight into how to find ( or better yet, get Alerts sent to you by both E-mail and SMS ) would be much appreciated Thanks for the help Here is a portion of that Article: " Nothing gives an investor more information on the future direction of a stock than watching unusual options activity. After all, they have hundreds of thousands of dollars (sometimes multi-millions) riding on these make or break decisions. Now, if you don’t know, unusual options activity is simply above average volume on a particular stock option. What makes it so unique, unlike watching stock order-flow, is that we can identify if these are opening positions (new trades). How so? Simple, every option contract traded on a stock has volume and open interest. Now, of course, volume refers to all the options traded on a specific stock option (strike price) on that day, which includes options that are bought or sold. Well, naturally, open interest refers to all the contracts that are outstanding (open positions that have yet to be closed out) for a specific option contract (strike price). For example, if someone buys 4000 Micron 24 calls (expiring 4/24/14), with 1000 contracts of open interest…we know for a fact that thisis an opening position (new trade). However, we don’t know if the trade was placed as a hedge against a short stock position or if it’s speculation that the stock trades higher. Of course, trying to figure out the WHY is the most important element…even though we’ll never know for certain. That’s why I’m always looking for ways to connect the dots. Now, it doesn’t matter if you’re an investor or trader…knowing how the smart money is positioned is mega-valuable information. Let’s look at a recent example to see how this all works. On Wednesday, March 12, there was a large put buyer in Con Edison (ED) at around 12:15 Eastern Time, when the stock was trading at $54.59. They came in and bought 9,294 April 52.5 puts for .35 per contract. At the time of the order, the bid price was .25 and the ask price was .35. The open interest was 52 contacts. Of course, we know that this was an opening position because volume was greater than open interest. In addition, we know that this was an aggressive order because the trader was willing to lift the offer (buy the ask price) vs. trying to buy the options at the mid-price (.30). The order gave the trader the right (but not obligation) to be short 929,400 shares of stock. Now, what made this order interesting… is that ED on average trades 983 option contracts a day. On Wednesday, it traded 22,670 contracts… 98% of those contracts were puts! Again, that’s 23 times usual options volume.By the way, this is unusual options activity at its finest. However, we don’t know why they put this order on. We’re assuming whoever put the trade on is an informed trader…after all; they’re willing to bet over $325k on their idea…putting their money where their mouth is. Again, is this speculation or a hedge? I have series of questions that I rundown whenever an unusual options trade interests me. Allow me to share some with you. First, is this speculation on upcoming earnings? Probably not, their earnings are on 5/01/14…we can scratch that off the list. Is this a hedge against a long stock position? Possibly…however, I like to look at a chart to see if the stock has been in an up or down trend. If the stock is trending higher, they might want to buy puts to protect their profits and hedge. Well, for one thing, the chart looks pretty weak…it’s hard to imagine someone hedging a long stock position with such a bearish looking chart. Speculation that the stock drops further vs. a hedge makes for a more compelling argument. Moving on. Are they presenting at a conference or have been recently downgraded? No and No. You see, it’s important to have a corporate calendar nearby in order figure this stuff out. In addition, you should search for any related news that could possibly give us hints on why this large option trade went through. "
I have no idea. Has anybody else laughed at the incessant CNBC coverage of "unusual option activity". I love proclamation such as "huge buyer of 123 strike XYZ calls/puts. Yeah, well, there was a seller also, guess that counter-party didn't see things the same way.
Could you please link the rest of the article. It looks quite good. Livevol gives the best coverage of "unusual options activity" that I've seen. I am sure there are many others. You may want to look at Livevol: Livevol functionality videos: http://www.livevolpro.com/help/tabs.html https://vimeo.com/livevol/videos The videos linked above helped me get a sense of the power of Livevol Livevol also has a very powerful scanner.
People do it for the VIX all the time. Its quite funny to be honest. Someone bought millions of dollars of VIX calls @ 25! The markets going to crash!
Also it appears there is a good amount of base info on yahoo finance for those looking http://finance.yahoo.com/options/lists/
The counter-party is the Market Maker if there is no buyer. They are obligated to 'Make Markets' hence the name for that privilege they get to profit from the B/A spreads. At the end of each day they ensure they are flat
this is still in Beta and free. It will scan for option price anomalies https://www.getvolatility.com/