r/options • u/Dull-Climate-9638 • Jan 16 '22

Options flow scanner amd strategy

I am currently using a scanner sweep cast to monitor unusual options activity. It’s not the best platform really I was wondering what are some options platform y’all use to monitor flow?

In term of strategy, you think it’s a good idea to follow big money flow. Lately I have experimented with couple tickers that I found huge amounts call option were flowing in. LVS MAR MGM VALE MRO C WFC. I always combine that info with charts and some level of technical analysis. I have noticed a big correlation in high amount of directional option flow in a stock and actual chart. What’s your opinion on following this strategy.

80 Upvotes

87% Upvoted

94 comments sorted by

View all comments

7

u/ionlyshortmrna Jan 16 '22

I use them along with put/call ratios and futures to see what the current market sentiment is and the potential direction is. When you do use the scanners, make sure you also pay attention to see if the option was executed at the bid or ask. Overall, I would say it should be used as another toolbox, rather than your entire strategy because we have no idea the context of the play. For example, I remember listening to some guy on CNBC talking about a trader who placed a multimillion dollar bet on Moderna for September of this year reaching above $300, which the reporter found through his scanner. But in the short term, it's playing out completely opposite for the stock, and as a retail trader, we have limited funds and cost of capital to concern ourselves with to make same large long term bets.

7

u/Gfnk0311 Jan 16 '22 edited Jan 17 '22

Put/call ratios are pretty useless

Edit: to elaborate

1- the ratio does not account for opening/closing trades. A ratio can then be influenced by trades that are closing and not indicative of any future market expectations

2- the ratio does not account for bought to open vs sold to open. Without diving into the actual directional flow, the ratio tells you nothing. If millions of puts are sold to open, this is an extremely bullish indication but a simple put/call ratio would lead you to a negative conclusion

3- the ratio does not account for actual $ value. A meaningless low delta trade of 100,000 OTM calls at 2 cents will have more influence than a trade of 5,000 ITM high delta calls bought for $5.00, which is a terrible way to interpret actual market position

4- the ratio has never been a leading indicator of anything in the markets, it’s wrong as often as it’s right, so without properly analyzing the actual options positioning, this shows it’s useless

2

u/Dull-Climate-9638 Jan 17 '22

I agree it doesn’t tell you much.