Finding Unusual Options Activity: A Guide to Identifying and Trading with Smart Money

When it comes to trading, there are many ways to find potential trade ideas. However, one method that has stood the test of time is unusual options activity. In simple terms, this involves looking for trades that make you say 'hmmm... that's weird'. These are trades that stand out from the rest and have no obvious explanation other than someone must know the stock price is going in a particular direction.

Unusual options activity is an order flow strategy that focuses on where options (calls or puts) are being bought, primarily compared against historic or 'normal' levels. This approach can be used to identify the footprints of institutional investors, hedge funds, and potentially even insider traders before the rest of the market does.

Options are leveraged instruments that give equity traders the right (but not the obligation) to buy or sell a stock at a specific price on a specific date. When Wall Street moves into or out of a stock, 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.

But what makes options activity unusual? It's not just about identifying one-off trades; rather, it's about spotting patterns and trends that deviate from normal behavior. By looking at where options are being bought and sold, we can see which stocks are attracting attention and which ones are being ignored.

In this guide, we'll show you how to identify, screen, and trade unusual options activity using a range of tools and strategies. We'll also reveal why we use this trading strategy and how you too can find and screen trade ideas like Jon Najarian, Pete Najarian, and our team of analysts at Market Rebellion.

Whether you're an experienced options trader or just starting out, understanding unusual options activity can help you make more informed decisions and potentially increase your returns. So, let's dive in and explore the world of unusual options activity together!

Finding unusual options activity