Interpreting order flow

F

ferrycorsten

Here is a screenshot of yesterday's order flow in AAPL. I have a specific question regarding "net premium" and I'm also interested in any other things to look out for when interpreting this information.

Here is Livevol's definition (and example):

Net premium: The overall premium position accumulated by market takers (customers) through options only for trades on the bid or offer; i.e. people buying or selling option premium (vol).

So looking at AAPL, the call premium was +10.1M. Does this mean that the market thinks calls are underpriced (vol is low) and as a result people are buying them?

Net premium for puts is -$1.4M. Does this mean that the market thinks puts are overpriced, so they are selling them?

Net premium says nothing about direction, right (that's what net delta is for)?

Thank you for helping me with this.
 

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from my questions about those sort of things.. i usually get told its hard to find any meaning to any of that.. market takers or customers.. could have large short positions, and be buying up calls.. its hard to tell.. but i actually have no idea.. :)
 
Quote from ferrycorsten:

Here is a screenshot of yesterday's order flow in AAPL. I have a specific question regarding "net premium" and I'm also interested in any other things to look out for when interpreting this information.

Here is Livevol's definition (and example):

Net premium: The overall premium position accumulated by market takers (customers) through options only for trades on the bid or offer; i.e. people buying or selling option premium (vol).

So looking at AAPL, the call premium was +10.1M. Does this mean that the market thinks calls are underpriced (vol is low) and as a result people are buying them?

Net premium for puts is -$1.4M. Does this mean that the market thinks puts are overpriced, so they are selling them?

Net premium says nothing about direction, right (that's what net delta is for)?

Thank you for helping me with this.
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Obviously there are two sides to every trade. It is safe to assume that most of the time, the MMs are the passive side and the off floor firm or customer was the initiatory of the trade. I would not make an conclusions from just this data and would not find it useful in any way to monitor. However, if you chose to, the data would point to what the person that entered the order thinks, not the MM that posts two sided markets did. The market makers is a stock like Apple will tend to do either side of the trade for $0.05 to $.10 in vig for ATM options, less for OTM, and not care about that one trade unless every trade was on he same side. Then they adjust their markets.
 
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