Comments on: Using Unusual Options Activity to Predict Large Stock Moves http://theessentialsoftrading.com/Blog/index.php/2009/02/06/using-unusual-options-activity-to-predict-large-stock-moves/ Information and resources for those looking to learn about trading and the markets Wed, 23 May 2012 13:10:54 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Looking Back on a Good 2009 | The Essentials of Trading http://theessentialsoftrading.com/Blog/index.php/2009/02/06/using-unusual-options-activity-to-predict-large-stock-moves/#comment-16037 Looking Back on a Good 2009 | The Essentials of Trading Thu, 31 Dec 2009 14:14:59 +0000 http://www.theessentialsoftrading.com/Blog/?p=942#comment-16037 [...] Using Unusual Options Activity to Predict Large Stock Moves [...] [...] Using Unusual Options Activity to Predict Large Stock Moves [...]

]]> By: stephen kidd http://theessentialsoftrading.com/Blog/index.php/2009/02/06/using-unusual-options-activity-to-predict-large-stock-moves/#comment-15773 stephen kidd Tue, 15 Dec 2009 17:30:52 +0000 http://www.theessentialsoftrading.com/Blog/?p=942#comment-15773 I have found that when options move opposite of the underlying secutity, it is a very accurate indicator of the future security price. Security up/calls down, security goes down..usually the following day. What i want to know is, is there anyone who follows this or a scanner that shows this? I know Lafferty Options provides this with an account but commissions are very high. I have found that when options move opposite of the underlying secutity, it is a very accurate indicator of the future security price. Security up/calls down, security goes down..usually the following day. What i want to know is, is there anyone who follows this or a scanner that shows this? I know Lafferty Options provides this with an account but commissions are very high.

]]> By: Rod http://theessentialsoftrading.com/Blog/index.php/2009/02/06/using-unusual-options-activity-to-predict-large-stock-moves/#comment-13401 Rod Sat, 07 Feb 2009 19:19:04 +0000 http://www.theessentialsoftrading.com/Blog/?p=942#comment-13401 Mark, Good point, however I would like to ask : If I were trying to look into option volume to assess likely market direction, and I was suspicious about big players employing the strategy you describe, wouldn't I be able to find an unusual pattern in short interest? I am not sure about the answer to that, but to be fair to the poster, he did mention you should be aware of the issues you are concerned with: " .... One final note: Be Careful and look at the full Options Montage to see if the trading volume is part of a spread trade, a complex strategy, a rollover, etc. This part takes some practice, but identifying call and put spreads becomes easier through time, by looking for eerily similar volumes in various strikes. Also be wary of the intraday stock chart checking for large block trades that could be part of an options strategy, as a hedge (such as a collar trade)....." Mark,

Good point, however I would like to ask : If I were trying to look into option volume to assess likely market direction, and I was suspicious about big players employing the strategy you describe, wouldn’t I be able to find an unusual pattern in short interest? I am not sure about the answer to that, but to be fair to the poster, he did mention you should be aware of the issues you are concerned with:

” …. One final note: Be Careful and look at the full Options Montage to see if the trading volume is part of a spread trade, a complex strategy, a rollover, etc. This part takes some practice, but identifying call and put spreads becomes easier through time, by looking for eerily similar volumes in various strikes. Also be wary of the intraday stock chart checking for large block trades that could be part of an options strategy, as a hedge (such as a collar trade)…..”

]]> By: Mark Wolfinger http://theessentialsoftrading.com/Blog/index.php/2009/02/06/using-unusual-options-activity-to-predict-large-stock-moves/#comment-13395 Mark Wolfinger Fri, 06 Feb 2009 15:14:46 +0000 http://www.theessentialsoftrading.com/Blog/?p=942#comment-13395 I'm glad you were able to find winning trade ideas by following unusual option volume. I've never believed anyone could profit by doing that. I still don't believe option volume has any significance in predicting market direction. Why? Because you NEVER know if the purchase or sale is being hedged with stock or if's a straight play. If I'm a big player and want to hide my outlook from people who follow volume, instead of buying 20,000 puts, I'd buy 20,000 calls and short 2,000,000 shares. It would be a legged trade, and not submitted as a combination order. There's no way for anyone who follows volume could know that's what I've done. Mark I’m glad you were able to find winning trade ideas by following unusual option volume. I’ve never believed anyone could profit by doing that.

I still don’t believe option volume has any significance in predicting market direction. Why? Because you NEVER know if the purchase or sale is being hedged with stock or if’s a straight play.

If I’m a big player and want to hide my outlook from people who follow volume, instead of buying 20,000 puts, I’d buy 20,000 calls and short 2,000,000 shares. It would be a legged trade, and not submitted as a combination order. There’s no way for anyone who follows volume could know that’s what I’ve done.

Mark

]]> By: Rod http://theessentialsoftrading.com/Blog/index.php/2009/02/06/using-unusual-options-activity-to-predict-large-stock-moves/#comment-13392 Rod Fri, 06 Feb 2009 13:16:36 +0000 http://www.theessentialsoftrading.com/Blog/?p=942#comment-13392 Excellent post !! Thank you Joe and John, a very informative set of guidelines for anyone trying to make some sense of a difficult market. Excellent post !! Thank you Joe and John, a very informative set of guidelines for anyone trying to make some sense of a difficult market.

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