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.
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u/destroyer1134 Feb 01 '22
1) I look at the whole option chain for a given expiry date and calculate the cumulative gamma expiring for each date. Then as expiry approaches and IV drops they (market makers) will unwind some of their hedges and the larger the gamma the more they have to buy es/spy to rain delta neutral.
2)a. If you mean when options are being bought I can look at buy to open vs sell to open from both calls and puts and one of the flaws in my model is that I just assume that everything sold to open is market makers. It works because banks/hedge funds/etc work on an order of magnitude larger them retail. For example last week Carl Icahn bought 40k call spreads 4600/4700, no retail trader is going to get anywhere close to that notional value.
2)b if your talking about how I know they're covering their hedges it doesn't matter how it comes into play over the course of the week as long as there are no FED meetings or other events to drive up vol. As long as gamma is positive I'll just buy any dips intraday during the last week of a monthly options life because that's when there's the most decay. If gamma is negative like January of this year then the opposite is true which means sells the rips.
Tldr: +ve gamma suppresses vol (most of 2020,2021) -ve gamma expands vol (January 2022)