calls and puts, who is driving who?

Quote from NanoTick:

Thanks PM. Have you applied this kind of observations to your trading and does it give you any predictive power in directionality?
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Occasionally.
If the call volume for a stock usually average 50 - 100, for example, and one day you see it jump to the 4,000 - 8,000 range. Or a stock that has a history of averaging 300 contracts, suddenly does 20,000..... that tells you somebody or group of individuals are making a large bet on a significant move occuring in the next month or two.
And if you see it for more than one day, that is even more significant.
And if they were buying on the BID, that tells you it was probably a bullish bet, as they want it at any price.
Generally speaking, you will probably only notice something unusual like this, if it's a stock you are already in, and are therefore already keeping an eye on it.

It's actually somewhat rare to catch these type occurances, as they tend to come out of the blue. But I've used it to my advantage in the past, by not selling a covered call on a stock that was put to me, as I did not want to limit my upside..... if those investors are actually correct.
Sometimes they are correct and sometimes not. And sometimes they are correct, but their TIMING is wrong.
That being, they made a HUGE bet on a big move coming next month, but it actually occured 3 months later.
And sometimes not at all.

So I use it as another "tool" in my inventory of criteria to observe and consider. And I think it's a useful "tool", as part of ones analysis. But don't assume they will always be correct, just because they placed a huge bet. It might have been a knowledgeable bet, but it could have also been a speculative bet by some moron.
 
Quote from Put_Master:

Occasionally.
If the call volume for a stock usually average 50 - 100, for example, and one day you see it jump to the 4,000 - 8,000 range..... that tells you somebody or group of individuals are making a large bet on a significant move occuring in the next month or two.
And if you see it for more than one day, that is even more significant.
And if they were buying on the BID, that tells you it was probably a bullish bet, as they want it at any price.
Generally speaking, you will probably only notice something unusual like this, if it's a stock you are already in, and are therefore already keeping an eye on it.

It's actually somewhat rare to catch these type occurances, as they tend to come out of the blue. But I've used it to my advantage in the past, by not selling a covered call on a stock that was put to me, as I did not want to limit my upside..... if those investors are actually correct.
Sometimes they are correct and sometimes not. And sometimes they are correct, but their TIMING is wrong.
That being, they made a HUGE bet on a big move coming next month, but it actually occured 3 months later.
And sometimes not at all.

So I use it as another "tool" in my inventory of criteria to observe and consider. And I think it's a useful "tool", as part of ones analysis. But don't assume they will always be correct, just because they placed a huge bet. It might have been a knowledgeable bet, but it could have also been a speculative bet by some moron.
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also how far out of the money it is and how far out it is till expiration it is i understand makes a big difference... there are companies that send alerts for unusual activity like that.. . or you can log the time and sales of the symbols you watch... i've heard mixed reviews about this strategy.. i'm interested in doing more research on it though.. and as i've said before.. if options volumes go way up.. alot of the underlying trading i would assume be related to delta hedging.. IE pre earnings drift up.. call selling by market markers and their related purchases of the underlying to hedge gives the stock more of a bid.
 
Quote from Put_Master:

Occasionally.
If the call volume for a stock usually average 50 - 100, for example, and one day you see it jump to the 4,000 - 8,000 range. Or a stock that has a history of averaging 300 contracts, suddenly does 20,000..... that tells you somebody or group of individuals are making a large bet on a significant move occuring in the next month or two.
And if you see it for more than one day, that is even more significant.
And if they were buying on the BID, that tells you it was probably a bullish bet, as they want it at any price.
Generally speaking, you will probably only notice something unusual like this, if it's a stock you are already in, and are therefore already keeping an eye on it.

It's actually somewhat rare to catch these type occurances, as they tend to come out of the blue. But I've used it to my advantage in the past, by not selling a covered call on a stock that was put to me, as I did not want to limit my upside..... if those investors are actually correct.
Sometimes they are correct and sometimes not. And sometimes they are correct, but their TIMING is wrong.
That being, they made a HUGE bet on a big move coming next month, but it actually occured 3 months later.
And sometimes not at all.

So I use it as another "tool" in my inventory of criteria to observe and consider. And I think it's a useful "tool", as part of ones analysis. But don't assume they will always be correct, just because they placed a huge bet. It might have been a knowledgeable bet, but it could have also been a speculative bet by some moron.
More...

Thanks PM again. Your are the only one who knows what I'm talking about. The most likely cause of one-sided surge of demand is buying from insider trading or determined speculators. I agree it's pretty rare and no gurantee (if driven by speculation). But I believe the odds should be much better by my own speculation. Do you think there are these opportunities often, like once a week, if you can monitor the entire market?
 
Quote from Put_Master:

I believe you have have to observe whether the particular option was being bought/sold, at the bid or the ask.
If i saw a huge volume increase in a stocks calls over its usual vol, and it were traded at the bid vs the ask, that would seem to reflect someone was buying the calls vs selling them.
Thus a bullish indicator.
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PM, if the buy side is really motivated wouldn't most trades be at the ask?
 
the vol just moves. often it can move without any trades happening as market makers shift their quotes to be inline with the way the underlying is moving or the way comparable options are trading.

It's not really which option is pulling the other; a market maker will look at a vol surface which will provide inputs to both the call and the put. They will differtiate the call and the put based on forward risk. Otherwise they will change the vol based on flows in this underlying, comparable underlyings, or the market at large. He will tweak his vol surface and then reprice all the options simulataneously.
 
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