PETE NAJARIAN UNUSUAL OPTIONS ACTIVITY SERIES

The market is too big and too humbling for us to expect that. Unusual options activity is not a full-proof method to trading stocks. It doesn’t mean that the price of the stock will move. Trading based on unusual options activity works to align our positions with those of Wall Street’s “Smart Money,” those with insider knowledge of upcoming news or important information that can move the price of a stock.Ĭan is the operative word. Why do we trade unusual options activity?

(We discuss why this is in further detail in the “ Why do we trade unusual options activity” section below.)Īs small and nimble traders, we focus on capitalizing while these big funds are still amassing their market-moving position.ĭon’t Make These Rookie Mistakes with UOA Because of the inherent leverage that it offers, the ripples of “Smart Money” behavior are more easily seen by looking at options order flow than looking at trading in the stock market. However, options markets are still relatively small. And to do that, they have to try to mask their activity. When trying to add (or remove) a big position, these Wall Street firms will use all the tools available to them: listed exchanges, dark pools, and options markets.

These positions ultimately move stock prices in big ways, but the cause and effect may not be immediate. And when news leaks, there are some greedy insiders who try to take advantage.īut there’s another explanation for the “Smart Money” in unusual options activity: Wall Street hedge funds, pension funds, and other big money traders amassing huge positions. The dirty secret on Wall Street is that often news leaks, of earnings reports, upgrades or downgrades, drug trials, or other major, market-moving news, in advance of the news becoming public. Insiders offer one easy explanation for the source of unusual options activity. In simple terms, you are looking for a trade that makes you say “hmmm…” In even simpler terms, you are looking for a polar bear walking on a beach.

PETE NAJARIAN UNUSUAL OPTIONS ACTIVITY SERIES

In the options market, that’s a trade that stands out so much you can’t help but notice it a trade-or, more frequently, series of trades-with essentially no explanation other than someone must know the stock price is going in one direction or the other. It looks at where options (calls or puts) are being bought, primarily compared against historic or “normal” levels. Unusual options activity is an order flow strategy. Specifically, we will define what makes options activity “unusual,” tell you why we trade this strategy, how you can find and screen trade ideas, provide you with an overview of trade alerts, and then connect you with additional resources to learn more. On this page, we will give you the insider’s guide to how you can identify, screen, and trade unusual options activity-just the way Jon Najarian, Pete Najarian, and a team of our Market Rebellion analysts do. By looking at options activity, we can see the footprints of how they’re moving before the rest of the market does. These leveraged equity instruments give someone the right (but not the obligation) to buy or sell a security at a specific price on a specific date. When Wall Street moves into (or out of) a company, sector, or theme, the smaller options market is often the first place it’s noticeable. Unusual options activity is how we “ Follow the Smart Money” in our trades.

However, the one strategy that has stood the test of time, in our experience, is using unusual options activity to find trade ideas. Inside each of these categories, there are dozens of different strategies-most of which go in and out of favor. There is fundamental research, technical analysis, and order flow analysis. There are many different ways to find trade ideas.

Pete najarian unusual options activity