Strange options trading activity can often be difficult to decipher. It appears on a chart as heavy money flow. But what does it mean? When investors feel good about an option or a security, they tend to invest more money in it — pretty simple logic, and generally true. This shows up as that strange options trading activity. There are many helpful tools out there that help to track this, many of them quite new. While some are skeptical of this strategy, it has been shown to work.
- Unusual options trading activity is usually signaled by high money flow to a particular option.
- This trading activity occurs when investors feel good about something — which means it is a promising investment.
- While not everyone agrees that following such money flow is helpful, results have been shown from this strategy.
“Just last week, a decent flow trade hit on the SPY calls. It was a butterfly trade; 20,000 fly’s were bought, corralling the 300/310/320 October strikes. This trader paid 18 cents, or a cool $360,000 to open this up. If the SPY lands at 310 at the October expiration, the trade will be worth $20 million.”