Best Unusual Options Activity Scanner
Unusual options activity analysis is a great way to identify when big institutions buy and sell options. Trading options has the advantage that 100 stocks per options contract can be traded for low insurance called options premium.
Using an unusual options activity scanner is the first step to identify institutional trading activities, but not any trade means the same. Therefore, it is important to understand what types of trades can be made and how to identify the activities correctly.
This article about unusual options activity helps you to know how to spot, interpret, and how to use it to your advantage.
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How To Find Unusual Options Activity
Options unusual activity can be easily spotted by using appropriate market scanners. The first steps can be made using free tools, but meaningful option activity scans are complex. You need to filter the results from hundreds of options trades with unusual volume down to the few relevant cases.
Top Unusual Options Activity Scanners
Optionsonar follows the smart money into the most significant option trades on Wall Street by scanning and monitoring and analyzing the order flow of stock options contracts. The tool comes with pre-defined screeners and lets you discover new trading ideas. Optionsonar monitors all major option trades for any stock and splits the result into two categories, the bullish and bearish trades.
Dark pool orders, block trades, and a sweep scanner are implemented in Optionsonar. It also scans for stock option positions where the contract volume is greater than the open interest from the previous trading day.
The screener results include charts, option prices, volatility, technical analysis sentiment, strike prices and more. In addition, users can modify the scanner criteria and adjust filters for the number of traded options contracts, volume, days to expiration, bid-ask-spread and chose between OTM, ITM and ATM options.
Graphs, net UOA traded, company financials and a watchlist feature are also included. In addition, Optionsonar will send you an SMS, email or desktop notification once a relevant trade was detected.
Best Offer: Click here to test Optionsonar for free.
|Optionsonar||Unusual activity scanner||Multiple option scanners||Scanners and alerts|
|Unusual Activity Stream||✓||✓||✓|
|Unusual Activity Trading Log||✓||✓||✓|
|Watchlist (unlimited stocks)||✓||✓||✓|
|Dark Pool Orders||✓||✓||✓|
|New & Opening Positions||✘||✓||✓|
|Web Browser Push Notifications||✘||✓||✓|
|Billed annually (save 30%)||✘||$636||$948|
2. Market Chameleon
Market Chameleon’s scanning and research functionalities are utilized by stock and options traders. The most popular options scan features are unusual options activity, implied volatility rankings, options volume, buy-write searches, order flow sentiment and open interest analysis.
A dividend monitor, earnings calendar, options chain, various screeners, and web-based research tools are also available. Here are some additional functionalities:
- Intraday dividend announcements and earnings updates
- Download VWAP minute data and historical prices
- Historical option chains
- Option screeners for unusual options activity, covered calls, and many more
- Option block trades and trade reports
The total access subscription provides the best value and offers an incredible range of scans and data. A fantastic aspect is that subscribers can download the data to their computer for further analysis.
|Market Chameleon||Options Trader||All Access|
|Unusual Option Volume||✓||✓|
|Implied Vol. Rankings||✓||✓|
|Order Flow Sentiment||✓||✓|
|Open Interest Analysis||✓||✓|
|Buy Writes Search||✓||✓|
|Straddle and Wing Backtest||✓||✓|
|Stock Research Tools||✘||✓|
|Price per Month||$69||$99|
3. Black Box Stocks
Black Box Stocks offers a powerful dark pool option trading activity scanner, options alerts, options flow analysis, news and an options heat map. The results include insights with time stamp, symbol, expiration date, strike price, C/P, spot, type, IV, and value. Besides, Black Box Stocks also offers a Discord chat room, a private Twitter group, and trading signals for stocks and options.
Black Box Stocks is a community for active traders, and the unusual options activity scans are only one feature. Stock screeners, trading education for stocks and options, stock market discussions in the chat and weekly events make them an all-in-one solution for beginner traders.
Best Offer: By using our discounted offer, you save 20% on the monthly subscription. The discount will be applied automatically during the signup process. You do not need to enter a separate promo code.
|Black Box Stocks||Monthly Subscription||Annual Subscription|
|Options Heat Map||✓||✓|
|Pre Market Scanner||✓||✓|
|Post Market Scanner||✓||✓|
|Members Chat Room||✓||✓|
4. Benzinga Pro
Benzinga.com is one of the best websites for market news and research, and they offer a premium tool called Benzinga Pro. You can use Benzinga Pro to filter news with keywords and custom filters.
Stock traders like that tool because a wide variety of filters can be used to find the best match for your criteria out of thousands of news per day. Option traders prefer using their signals tool. You can scan for options activities with aggressive trades, large blocks, and option sweeps with the signals tool.
A nice feature is that you can see if the option order was executed at the bid, ask, or outside. Similar to Black Box Stocks, Benzinga Pro comes with stock screeners, access to a trading chat room and trading strategies education.
|Benzinga||Essential Plan||Options Bundle|
|Price Spice Scan||✓||✓|
|Audio and Desktop Alerts||✓||✓|
|Option Trading Education||✘||✓|
|Price per Month||$70||$87|
5. Option Trading Alerts
Daily options market scans take time. Many traders prefer to follow explicit trade alerts to:
- Tade those trade ideas and option picks
- Learn more trading strategies
- Better understand the coherences of the options market.
Our list of the best options trading alert services includes the market leaders in the options trade alerts and education sector.
Unusual Options Activity: Conclusion
It is essential to integrate a good process during the trading day to spot and utilize this type of options activity. Hedge Funds on Wall Street have vast groups of traders, and they trade all day long because they take their job seriously.
You should treat your trading with the same respect as a professional, institutional trader. The more time you invest, the better your results will be. Start small, trade 1 contract once you made progress trading paper money. Trading 1 contract already means that you control 100 shares of the underlying stock.
Do it step by step and increase the leverage slowly. Ensure to reduce the contracts traded if things don’t go the way you want or if the market is completely irrational or volatile. Unusual options activity will be here today, tomorrow, and for the next decade.
Scan The Market
If you go the route of identifying unusual options activity yourself, you have to look at the scanner results. Also, make sure to identify a potential IV Crush. An IV Crush often happens to short-dated weekly options near the expiration date.
Start with this question: Do institutions buy a massive number of calls and put them to generate high-percentage returns, or do they sell options trying to go for the premium? To answer this question, you only have to answer yourself the question of what type of trade has a lower risk and higher potential.
Buying calls and buying puts is equal to having a pre-defined maximum risk per trade and unlimited profit potential. On the other hand, selling options means that your risk is unlimited, and at the same time, the profit is limited.
This situation is similar to buying or selling stock by stock traders. Traders who buy stocks have limited risk if they buy them. But if the short a stock, then the risk is unlimited.
Trader A buys a stock for $1 per share. Trader B is shorting stock for $1 per share. Both are 100% confident that the move of the share price will be in their favor. Trader 1 is looking for share prices to rise. Trader B is speculating on a further decrease in stock price.
After 14 days, the price is at $2 per share. At this point, Trader A made the same profit as trader B made losses. So at the moment, it looks equal. Now, another week later, the penny stock rose to $10 per share because an FDA approval gave the stock a boost, and currently, it is trading ten times higher at $10.
At this point, Trader A made $9 per share and risked $1 per share as a max loss. But Trader B’s maximum potential was to make $.99 per share if he could buy back the shorted stock at 1 cent per share. But now, he faces a loss of $9 per share.
Another week later, the stock is at $100 per share. So you get it right, Trader A made $99 profits per share so far by risking $1 per share, while Trader B lost $99 per share while he tried to make a maximum profit of 99 cents per share.
Another week later, it turns out that the company has to stop doing business, and the stock price falls overnight to $.01 per share. Both traders were holding the stocks all the time. Now they close the trade.
Who is the winner? Is it Trader B who closed out the trade for a profit of 99 cents per share? In between, he already had an unrealized loss potential of 99 dollars per share. Believe me, you will not be in such a situation trading stocks.
You will be Trader A, who had a pre-defined risk. Sure, in this example, it seems a bit crazy that Trader A did not sell the stocks for profits. But you get the point.
And what does it have to do with options trading? Well, that’s simply because it is even worse for those who sell options naked trying to get the premium.
Leverage and Profits
The leverage is much higher than by trading stocks, and one single naked option selling trade can cost you everything you have. I know many advertisements promise something different. But do the math by defining the maximum profit and maximum loss of investment.
Big institutions aim to utilize the huge leverage to generate 200%, 500%, or 1,000% returns buying options by risking just a fraction of the profit potential.
And what does that mean for investors who scan the market for unusual options activity?
Scanning for unusual options activity means that you need to identify big options trades that are:
- Speak for aggressive buying based on trade execution
- Unusual volume relative to the overall value of an underlying stock
- Options traded relatively high compared to the open interest.
If an options trade is executed at the ASK, then it speaks for aggressive buying because the trade was executed at the best possible price for immediate fills. If the price gets executed above the Ask, it is even more aggressive to buy an options contract.
It is also a big difference if 1,000 contracts for the SPY are traded at the ASK or if 1,000 contracts for a $10 stock are traded because the volume relative to the value of the stock is different. So just because you feel that 1,000 contracts are a lot, it does not mean that it is a lot. Therefore you need to look for what is relatively high options trading volume.
Another indication is the traded options contracts relative to the open interest. Open interest stands for the number of option contracts that have been traded but without an offsetting trade. So if another trade with more options contract trades comes in, you know that an unusual options activity occurs.
Putting all things together helps you to filter out the noise of irrelevant option activity. In the next step, you need to check if some specific event is coming soon. That can be:
- Earnings report
- FDA announcement
- Analyst meeting
If you spot unusual activity before such an event, then it might be that someone knows something or thinks to know something. Make sure to filter those trades by options volume, too, because you want to make sure that only substantial institutional trades are being considered.
Therefore, go for a filter of options volume of at least 1,500 contracts per trade. This logic can be used for buying call options and buying put options.
As mentioned above, never consider selling options naked. If that could be done profitability with low risk, institutions would do it, but they don’t. So instead, institutions buy call options and buy put options to benefit from the leverage.
Preparation and Trading
As an options trader, you need a scanner to find those trades, a news source to look for catalysts, your quote details to check the open interest, and finally, the options chain within your trading platform to place the trade.
Investors who are new to options trading should learn to trade options first. This can be done by joining the best options trading courses and making paper trades within the trading platforms. One single click can cost you money.
You need to be prepared to trade with real money. Education is one part, but practicing option trade placements is at least as important as education.
You need to understand:
- How the options chain works,
- The role of BID and ASK
- The meaning of a SPREAD
- Open positions
- How to close a trade
There are many more things to learn and practice before trading with real money. The stress level when trading with real money is much higher, and the higher the stress level, the more mistakes may be made. Become confident first and make sure that you understood the whole process.
When are you ready? You are prepared to trade when you feel confident and make profits with paper money for at least 2 to 4 weeks. The higher the data sample, the better. Statistical significance is essential to evaluate if you are trained enough.
Unusual options activity trading is an excellent way to utilize the knowledge of hedge funds and other institutions. This type requires excellent analysis skills, a good trading platform, a reliable market scanner, and real-time news. Investors also need a reasonable amount of time to do the due diligence process to get into the trade on the same day.
An options picking service can be used as a shortcut because the service does all the work for the investors. However, using an options picking service still requires excellent trading platform skills and a good understanding of the option and stock market.
Joining such a service also requires a reasonable amount of data samples. Only if money trades are made with profits over a more extended period then real money trading should be considered.
- What is unusual option activity?
- Does unusual option activity work?
- Where can I find unusual option volume?
- What does heavy call option volume mean?
- How is it useful to know unusual option volume?
What is unusual option activity?
Unusual option activity is a term used when an options trade with at least 1,000 options is being executed at the ask for calls or at the bid for puts.
Does unusual option activity work?
Unusual options activity works best in combination with an option scanner in combination with catalysts like earnings, and FDA announcements.
Where can I find unusual option volume?
Unusual option volume can be found by using a market scanner. Sort the result table by the ratio of today’s volume to open interest.
What does heavy call option volume mean?
Heavy call option volume is present if today’s call option volume is significantly higher compared to the average volume.
How is it useful to know unusual option volume?
Unusual option volume is often used to identify institutional trades. Massive institutional buying is often interpreted as a signal for upcoming meaningful price movements.