Limit price orders also can be shorted, which can have a reverse meaning for the order. Limit orders can try and enter at the best prices to save money. Orders placed as a limit order are the least type of aggressive order because it takes time to get filled. The first type of order is a "trade." When an options flow scanner marks the large order as a "trade," this means that the order was placed strategically as a limit price order. First, understanding which kind of order was placed can give us more insight into how aggressive and meaningful the order was. Two main types of unusual option orders can be placed by smart money. The order type also confirms this, which appears to be a "sweep." Types of Unusual Option Order Types As you can see below, the first order has a VOL/OI reading under one, which is highly aggressive. BreadAlerts allows traders to see the volume and open interest readings on the right. This surge in put buying activity can cause the price of these options contracts to increase sharply, with high volume and open interest being low. More specifically, there was heavy put activity for orders with a size over $100k. If you were watching SPY's options activity that day, you would have noticed that most of the trading was taking place in the put options. Typically if the most important orders placed are all in one direction (calls or puts), this tells us a directional bias in the stock, which can be helpful for traders to play. Looking at the most significant orders, we can see the biggest bets placed by smart money. Next, let's dive into the actual orders for the SPY and sort them from largest to smallest. Since most traders cannot place orders this large, we assume smart money is behind these orders. A large order is typically one single option order with a size over $25,000. The graph totals the number of "large or unusual orders" placed on the SPY for this day. On March 6, the options volume for SPY calls came in at $1.6 million, while the number of puts came in at $5.4 million. Let's look at an example to help illustrate this concept using this unusual options activity scanner called BreadAlerts. This activity can be a valuable indicator of where the smart money is placing its bets. One way to level the playing field is by paying attention to unusual options activity. As a result, they have access to better information and resources, which gives them an advantage in the market. When it comes to options trading, smart money is typically more sophisticated than retail options traders. Smart money includes institutional investors, such as hedge funds and mutual funds, while retail options traders are individuals who trade for themselves. There are two types of options traders - smart money and retail options traders. While there are many ways to read unusual options activities to understand the markets, one of the most popular strategies we will talk about today is Call Sweeps. For example, if you see a large number of call contracts being traded for a particular stock, there may be an opportunity to sell puts or buy calls. When there is an abnormal amount of options trading taking place, it's often an indication that something big is about to happen with the underlying stock.Īnother reason to monitor unusual options activity is that retail options traders can use it to identify potential trading opportunities. First and foremost, it can be used as a tool for predicting stock price movements. There are several reasons why you should pay attention to unusual options activity. This activity can be caused by several factors, including rumors, news, or even insider trading. Unusual options activity is defined as a sudden increase in the number of options contracts being traded for a particular stock.
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