If you think it can be tough to get your basic option trade filled, just imagine what it is like for a big, institutional trader looking to take a massive options position. Savvy retail traders have figured out how to spot the signs of a huge position setting up in the options market. They call it Unusual Options Activity. The name really fits, too. These type of situations occur when an institutional trader decides they want to get into an options trade based on some research, pattern or other information that has come up on their screeners.

But it is nearly impossible to pull that off without sending signals. And sharp retail traders have figured out the signs that a move is happening and will often try to ride the wake of that move. Here are a few of the signs that help them spot these golden opportunities.

Volume That Greatly Exceeds What is Typical

The most obvious sign is a spike in volume that is much greater than the usual open interest for that option contract. By looking at the options chain it can be easy to spot. Most platforms will list the two side by side and disparities are obvious.

Activity Across Multiple Exchanges

Because it can be hard to find enough buyers or sellers to build these positions, the big money traders will place orders across multiple exchanges. Another tell that this is happening is when the big orders fill at whatever price they can get.

Quick Grabs

Sometimes these positions will be out of the money options with a very short time to expiration. This is a clear sign that whoever is building the position is expecting something big to happen and they are looking for a hefty payout.

While the combination of signals that help spot these moves have been around for awhile, The term is first credited to Jon and Pete Najarian, hosts on CNBC’s Fast Money.

Keep learning and trade wisely,

John Boyer

Editor

Market Wealth Daily