Thoughts on unusual options activity?

Philo Judeaus

Philo Judeaus

Scanning options intra-day for >5x the average volume and scalping the move of the big trader.

Its an interesting strategy. The biggest hedge funds/banks/traders have information we don't, so watching their activity could be beneficial if you play it right. Know that half of the orders could be hedges instead of speculation.

But I was wondering if anyone on this forum does this?
 
Such a tough question to answer. Lot's of noise as you suspect, but occasionally a home run. Follow TradeAlert on FB or Linkedin and after a while consider subscribing. This week a size trade in CBLK went up just before the annoucement. A lot of big trades aren't directional bets and sometimes they are and wrong - look at TGT trade I posted from TA earlier this week - it was directional, huge and dead wrong. I post some of TA's stuff here when it off FB or Linkedin. Would not post his subscription stuff.
 
yea if you are good at deciphering unusual options activity then its amazing. As they say, "follow the money" :D But seriously, I would rather risk money based on the fact that if im wrong, someone is going to lose a ton more than me. Unlike using just TA where if you're wrong, nothing else in the world is affected.
 
"Scanning options intra-day for >5x the average volume and scalping the move of the big trader." - Highly likely 'two' big traders. Which one do you decide to follow?

"The biggest hedge funds/banks/traders have information we don't," - Less than you think. The bigger the market - this moves towards 0.

"so watching their activity could be beneficial if you play it right." - Highly unlikely you interpret 'why' correctly.

"Know that half of the orders could be hedges instead of speculation."- Much higher than that.
 
Times said:
yea if you are good at deciphering unusual options activity then its amazing. As they say, "follow the money" :D But seriously, I would rather risk money based on the fact that if im wrong, someone is going to lose a ton more than me. Unlike using just TA where if you're wrong, nothing else in the world is affected.
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Ooh this is clever. How have you used this in the past?
 
You can watch the block order tape on LiveVol. It has made me believe that the pros are losing a lot more than they lead on. If you have a live feed with all of the trades (not just large orders), you can correlate the timestamps and trade prices against bid/ask to reconstruct the complex spreads. I have spent a fair amount of time/money on this and decided that it isn’t worth the effort. Bottom line in options is that you still need a volatility forecasting model, or insider info.
 
Interesting topic. I've been watching some videos where the guy claims to use both stocks and options orderflow. So in one video he was asked the same question - how do you know it's not hedging/legging?
While he did not explain the algo they use(it generates alerts), he said that they can usually tell the difference. My understanding is that they look at aggressiveness of the orders such as orders sweeping multiple exchanges. I believe he mostly trades weeklies, so we are talking short term moves. Also, options on stocks which are liquid, but not to the point where there's so much activity that it's very hard to read orderflow.
Conceptually, I can see how "informed" people can easily front run equity moves with options and it is more difficult to hide options activity than stocks'. So, to me, it sounds like a valid concept, although I haven't tried it yet.
 
ZBZB said:
www.optioncolors.com are doing statistical forecasts of volatility but they will not say more than that so it is a black box.
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The SJ options they are connected to is clearly BS.

"SJ Options "Trade Idea" service produced a 98% win rate for the last 4 years."

Are people so desperate that this doesn't set off the bells and whistles that it should???
 
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