i am looking at different securities that have extraordinary high option volume. is there a way that i can tell if they were bought because they are long that position or if it is just to hedge a current position?
studying high volume
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the delta on the call typically
can you kindly elaborate?
Loosely speaking, delta is the market derived probability of a stock landing at a strike price on expiry. You shouldn’t use this as the basis for a trade, but see it as a kpi to support a trade you’re making or are considering.
How could anyone else tell why you bought some options or sold them, and whether it’s a bet or a hedge, and whether you have other related options that make a combo, or whether you’re rolling/replacing some options with others? There are lots of possibilities and it could even take you a minute to explain to someone what specifically you are doing.
there’s scanners that specifically look for large block orders. Years ago I was in Chicago at Andrew Keene’s office watching him trade/follow large option orders. Even if you “know” a specific trade was bought/sold it’s still not much information. Trader A could buy 363 calls in $F but maybe he’s hedging short stock? It all depends, I think if you follow large volume/trades daily and study/trade it a lot you’ll develop a heuristic method for determining how to follow these types of orders. But nonetheless it’s still much more complicated than that.
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You would most likely get more help from a put call ratio@ extremes..............................