"Options market pricing in a X% move on the stock"
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If you're smart, you'll stay FAR AWAY from anything that Dr. J fellow has to say. He's a shady self-promoter who's had a number of legal and ethical "improprieties" over the years. If you want to know more about how shady he is, just peruse some of the customer reviews for his books on Amazon. That guy seems to have left quite a few angry people in his wake. IMHO, shady self-promoters like him are the worst thing that ever happened to the options business. It's a shame that the CBOE still associates itself with him, especially after all of his disciplinary problems at that exchange.
Also, it's really not possible to predict stock movement just by judging paper flow in an options product. You simply have no idea what the customer is trying to do, how he is hedging and what other positions he has on. As a result, there is no way to logically infer what he is trying to do. Just because someone buys a call, it doesn't mean he wants the stock to go up...
Also, it's really not possible to predict stock movement just by judging paper flow in an options product. You simply have no idea what the customer is trying to do, how he is hedging and what other positions he has on. As a result, there is no way to logically infer what he is trying to do. Just because someone buys a call, it doesn't mean he wants the stock to go up...
Do you have any evidence of disciplinary action against Najarian?
As to your second point, to each his own, but I strongly disagree. You can tell a LOT about underlying movement based upon the paper flow on options. Take a look at the "Bond Rally Nearing an End?" thread for plenty of examples that presaged major market movements.
I don't subscribe to Najarian's service, but I've built my own "OddFinder" based on similar principals to his Heat Seeker. If you take the interesting opportunities, you'll tend to win. If you take the side of every "odd event", you'll lose.
A recent example that worked for me was Intel--odd activity got me into 22.5 calls right before the big up move a few weeks back, and got me out the day before earnings were announced. I was concerned about the volatility crush and wanted to get out before earnings, but seeing huge sales volume of those same calls made me think this was a pre-earnings runup, and not a surprisingly good earnings event.
Let me give you a hypothetical example: INTC is down 2%, but someone purchased 5000 OTM calls and paid enough to make that strike actually rally .30-.40 on a 2% down day. Add to that it's only a few weeks before expiration and they bought front month options. Do you really think this person is short the stock and hedging against an up move?
It's possible, but unlikely. Trading is all about the odds, and I'll happily take that bet.
Like FullyArticulate, I still believe options can predict moves in an underlying. Its not 100% accurate, thats a given, and I also said I don't trade his calls via his service anymore, because I felt the site took a shotgun approach, putting you in too many options with not enough juice.
In regards to the actions against Najarian, I too would be interested to see these. I never said the guy was a saint, but I did read some of the Amazon reviews, and found some mentioning articles about him in the Tribune and the Sun-Times. I have historical access to both, and could only really find one article that backed up what the person on Amazon was saying. Here is the excerpt :
Rumor control During the late afternoon Tuesday, excitement swept through some business newsrooms around the country and the executive suite of the Chicago Board Options Exchange.
The source was Jon Najarian, president of Mercury Trading in Chicago and someone who, in the insular world of options traders, is famous for working at being famous.
On his Web site, he had posted rumors of an imminent merger between the CBOE and the New York Stock Exchange.
Then he dispatched staff to call reporters so he would be sure to get credit.
Najarian's best fact to support his disclosure? CBOE Chairman William Brodsky and NYSE Chairman Richard Grasso would be meeting at 7:30 a.m. Wednesday.
Well, yeah, they "met" all right -- during a teleconference forum that included more than a half dozen other securities executives around the globe. Hardly the place to discuss, or disclose, a business deal.
In Najarian's defense, we really should only blame ourselves for feeling suckered. After all, Najarian's the same guy who's resume says he "played as a linebacker for the Chicago Bears football team." You won't find his name on the Bears' all-time roster, though. He was signed as a free agent in 1981, but was cut in pre-season.
In regards to the actions against Najarian, I too would be interested to see these. I never said the guy was a saint, but I did read some of the Amazon reviews, and found some mentioning articles about him in the Tribune and the Sun-Times. I have historical access to both, and could only really find one article that backed up what the person on Amazon was saying. Here is the excerpt :
Rumor control During the late afternoon Tuesday, excitement swept through some business newsrooms around the country and the executive suite of the Chicago Board Options Exchange.
The source was Jon Najarian, president of Mercury Trading in Chicago and someone who, in the insular world of options traders, is famous for working at being famous.
On his Web site, he had posted rumors of an imminent merger between the CBOE and the New York Stock Exchange.
Then he dispatched staff to call reporters so he would be sure to get credit.
Najarian's best fact to support his disclosure? CBOE Chairman William Brodsky and NYSE Chairman Richard Grasso would be meeting at 7:30 a.m. Wednesday.
Well, yeah, they "met" all right -- during a teleconference forum that included more than a half dozen other securities executives around the globe. Hardly the place to discuss, or disclose, a business deal.
In Najarian's defense, we really should only blame ourselves for feeling suckered. After all, Najarian's the same guy who's resume says he "played as a linebacker for the Chicago Bears football team." You won't find his name on the Bears' all-time roster, though. He was signed as a free agent in 1981, but was cut in pre-season.
You may think that is a silly incident, but the CBOE was not at all pleased with his actions. They seem to have gotten over their anger in recent years, but I think that's just because there really aren't any other options spokesmen out there right now. Hopefully, that will change soon. I think the best part of that article was the description of him - "someone who works hard at being famous." Perfect!!
As for INTC, I have several friends who used to be market makers in INTC options and they would STRONGLY disagree with your statement. They used to show me the elaborate databases that they kept to try to track paper flow, and even they would admit that, at best, trading off of that info is akin to a guess.
As for INTC, I have several friends who used to be market makers in INTC options and they would STRONGLY disagree with your statement. They used to show me the elaborate databases that they kept to try to track paper flow, and even they would admit that, at best, trading off of that info is akin to a guess.
what software did you use for the "OddFinder" Opscan?
I used Dr. Js service for a while, the problem is they recommend something and that option is already up 10-20c, sometimes more from their "entry price" sometimes thats a 50% move already. I find it hard to belive they post first and trade later...
what is the CBOE TV/heat seeker?
i thought that was Dr. Js $500/month service?
http://www.cboe.com/tradtool/webcast.aspx
The above link is where CBOE-TV is. DRJ also has another webcast at optionmonster.com, although its basically a rehash of CBOE TV.
The $500/month service is the blog at insideoptions.com . Its updated several times throughout the day.
The above link is where CBOE-TV is. DRJ also has another webcast at optionmonster.com, although its basically a rehash of CBOE TV.
The $500/month service is the blog at insideoptions.com . Its updated several times throughout the day.
I built my own stuff on top of DTN's IQFeed. I put together a variety of filters and scoring systems to try to correlate multi-legged trades, and then combine that with the move of the underlying.
Short term options which drive up call prices on down days is a hugely bullish signal. I'll then go and look to see if I can find a reason why people would be bullish, and if there are any arguments why I shouldn't be.
I take probably 1 out of 10 trades that get through my filtering scheme. Last year, I won on 90% of these (about 50 total trades).
Dr J's segment on CBOE TV seemed to have a similar ratio, about 1 out of 10 were interesting enough to pursue. Some company speaking at an investor conference was almost always a worthless event. Some company expecting to hear back from the FDA in the next few days was almost always an event worth playing. If the chart confirmed a pattern I played (refilling gaps is a great one), I would take the trade.
I'm never interested in any (put or call) volume on a company setting 52-week highs or lows, for example. I am interested in identifying basing turning points, and it has served me well.
