Everything you need to know about high volume options

Traders frequently search for ‘high volume options’ thinking they are following a trend or unusual activity, but they often don’t really know what high volume options is or what it means. Do high volume options mean a bullish signal? A bearish signal? The answer is both and neither. There are a couple reasons why a certain ticker might have high options volume. Let’s go through them here.

  1. Generally high volume tickers

In this scenario the ticker is generally, a high volume ticker where both shares and options are traded in high volumes on the daily. Tickers like market indices (SPY, SPX) or mega-cap stocks like AAPL, AMZN, MSFT, etc are typically high in volume even on the average day. This is mainly due to the fact that they are stable blue chip stocks that people, as well as institutions, trust and want to own or add to the portfolio. When big institutions trade these stocks they are known to buy in the millions of dollars worth of shares which will by nature increase the volume. Use the SwaggyStocks option volume trends tool to see which tickers are currently ranking highest in terms of option volume, and also see which strikes/expiration dates are being traded the most.

  1. Unusual Options Activity

Unusual options activity is high options volume that would be classified as ‘unusual’ for a particular stock. You can get a good understanding of unusual options activity by checking out our SwaggyStocks unusual options activity scanner. For example, a $10 million options position in AAPL (Apple Inc) is quite normal whereas a $10 million bet in SNAP (Snapchat) would be classified as unusual and could raise some eyebrows. There are a few reasons that would cause unusual options activity, sometimes it’s a big fund hedging an even larger position, sometimes it’s smart-money or someone in the know making a directional bet. We really don’t know what causes unusual option activity in a stock, to read more about how I implement this kind of option flow into my trading, check out the post on unusual options activity.

  1. Trending Tickers

Lastly, another factor that might cause a stock to have high options volume is that the stock is currently trending and riding up or down on “hype”. Check out SwaggyStocks trending tickers and sentiment tool to get an idea of which stocks are being talked about right now. There are many events that can cause a stock to trend. Some of those reasons include: news of a merger or acquisition, an earnings report (good or bad), structural changes within the company such as a CEO stepping down, or it could even just be hype based on how the stock price has changed in the short-term (let’s say the stock went up 15% in just 2-3 days).

High options volume in a particular stock doesn’t necessarily mean it is a buy or sell. It’s up to you to figure out why a stock is participating in high options volume. Is it normal activity? Is the stock trending? Are the reasons behind the stock trending bullish or bearish? Answering some of these questions will help you ride the stock’s momentum.

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