How To Avoid Getting Burned By Reading Unusual Option Activity

| August 25, 2022

I want to focus on what is dubbed as Unusual Option Activity (UOA). There are plenty of talking heads on media and services pushing UOA as a viable and reliable trading strategy. It is not. I worked at one of the world’s largest aggregators of option flow analyzing – bid/ask, size – and found most of it you can’t act on. A hint, maybe. A home run… rarely.

Using option activity as an indicator for impending price moves is difficult, subjective, and unreliable. That being said, it can help confirm other indicators and increase the probability of a profitable trade.

Here are some basic criteria for identifying meaningful activity and avoiding the chase for activity that ends up being useless noise.

This post appeared first on Option Sensei.

 

Category: Unusual Options Trading Activity

About the Author ()

Adrian Collins works as an Outreach Manager at Option Dash. Option Dash is always looking forward to offering the best covered call and cash secured put screener on the internet. Adrian is passionate about spreading knowledge on stock and options trading for the rising investors.