Not long ago, there was an era of trading that was not limited to online interest-based software. At that time, people were usually interested in using raw talent and their keen observation to predict any major market shift coming in the next few days.
That’s right; I’m talking here about the era of unusual options activity trading. It was more than just keeping a record of the underlying stock like in our standard daily trading.
All this was dependent at the time on the large-scale buyers of a variety of options. Are you interested in the stock market, then you should know its basics like unusual activity? It is a single trade that can be bought on the ask or sold bid.
In addition, it is bought and sold with an unusual volume and trade size compared to particular expiry and strike. They are the new contracts being traded in the stock exchange and show a fresh opinion underlying.
What is unusual options activity and why it is so interesting? First, they are usually traded on the extreme urgency by the traders, and they are interested because of their large trade volume and being bought on the ask or sold on bid.
Let’s suppose the trade happened of 10K calls which had a spread of $1 by 1.90, and the order was placed at the maximum, $1.90.
This little example explains the term unusual activity in a broader way. The broker or trader calls 10K at the maximum rate. If he had tried to middle his order, he could buy the shares at somewhere 1.50 and could save lots of bucks.
But the trader doesn’t care about the bucks because he had high expectations from this trade, and a few thousand dollars are just like a few bucks.
There are several helpful tools and applications which make it easier to discover these trading by activity scanning and help you to find this kind of trading.
How to Find Unusual Option activity in trading
First, you need a proper application and set it according to your expectations, and then the work begins.
These settings include days to the expiration of the option and the total amount of traded money. You can efficiently set both of these values according to your trading criteria.
Moreover, there are more ways to locate unusual options activity. To know more about them, you must read the following techniques.
Ways to locate Unusual Option Activity
The following ways we are going to discuss are considered unusual options activity.
- One way to locate the unusual options activity is considered when the volume of a specific stock is higher than its historical average.
- If you are familiar with the stock market, you would know that the volume of the options activity indicates the number of contracts traded in a given time.
- The contracts which have been traded but not closed by any party are known as open interest. You cannot consider a contract closed until both the seller and a buyer exist for the contract.
- The second way to find out the unusual options activity is to observe the expiration dates of different contracts. For example, if the expiration date is far away or in the distant future, then this could be an unusual options activity.
- Moreover, the additional time in the contract expiry indicates that the potential of raising the strike price is enormously high and growing its time value.
- In this case, the time value is most important because it denotes the difference between the asset’s value and the strike price.
- In the end, the following contracts whose strike price is far away from the introductory price are also included in unusual options activity. These are also stated as begin “out of money.”
- These unusual trades happen because the value of the basic stock is expected to change rapidly in the near future. That’s how the buyers and sellers can take the massive benefit of a more significant profit margin.
Scanners for Unusual Options Activity
If you are an options trader, you must have heard the term “stock scanners.” Unfortunately, most options traders are not aware of this tool and who have listened about it don’t know how to use it effectively.
This is the job of the assistance staff which monitors the activity of the option stock via scanning stock. All the major platforms of trading use this tool to see the market activities and unusual activity options in particular.
This helps the traders to get notified about any suspicious contact. At this point, if you have selected the best scanner according to your ease and your trading requirements, then you should focus on your strategies.
These strategies help you to operate your scanner productively. It would be great if you understood the importance of the strategy you are going to select. Because it will directly influence your trading, buy or sell choices and their results.
However, you should get fundamental knowledge about your scanners and strategies for educational purposes. If you have a better understanding, you will implement the scanning strategies more efficiently.
It will provide you the excellent volume evaluation and trades data at the end of your day. In addition, we are living in an era of miracles of technology. Therefore, you can easily find the best scanner for stock and unusual optional activities.
This will do all your job; you just have to set up the scanner for maximum and minimum money volume and any unusual activity. Ultimately, the scanner will become your best scanning assistant and makes sure everything is in order.
Unusual options activity is a remarkable strategy that can enormously reward an investor. They just need high skills to operate it correctly. However, if someone is a less experienced trader, he should use it as a tool to make an educated investment.
A beginner and new trader can use it to take other observations into account. Are you looking for a solution to grab further details about unusual options activity? Then click on this link vig.com and reduce your queries.