A Complete Understanding of

Unusual Options Activity

Unusual options activity is a hot buzz word these days. A lot of people are talking about it, but not many truly understand it. The idea behind unusual options activity is to find trades that the big money traders (think funds with hundreds of millions of capital at their disposal) are taking with their own money. It's not just finding the trades these big money traders are taking though, it's more about pinpointing the trades that they are aggressively entering. It's the aggression of their entry that separates the ok trades from the highly profitable ones. We have shown, through spreadsheet tracking, that when we follow the right trades from these big money traders, the probability of them generating a profit is extremely high. Keep reading to find out more about unusual options activity.

What Is Unusual Options Activity?

Unusual options activity is just what it sounds like. What we are doing is scanning the options marketplace to find unusual activity that suggests a large position is being built. It isn’t just about looking for large positions, though. The key is to find large positions that are being opened aggressively. We see large positions in the marketplace all the time. The ones that stand out, and have shown to have a very high probability of generating a profit, are the ones that are not only large, but entered aggressively.

Who Is Taking These Positions?

When I say large positions, I don’t mean someone putting $50,000 into an AAPL contract. Now, $50,000 might be a large position for you and me, however, in the overall market that just isn’t a large position for AAPL. Those types of trades happen all day long, it just isn’t unusual. So, we’re just not looking for that. When I say large positions, I’m referring to millions of dollars. The traders who have the ability to put millions of dollars into an options contract are the big money traders. These are the firms managing hundreds of millions of dollars. Someone managing fifty million dollars isn’t putting on a twelve million dollar trade. That’s just not how the big money trades. So, the traders we are looking to follow are the ones who have hundreds of millions of dollars to manage and are willing to expose multiple millions at a time.

Why Does Following Unusual Options Activity Work?

There are a few reasons why this type of trading works for the average retail trader. First, remember who is placing these trades, these big money funds with hundreds of millions of dollars under management. These are the traders who have the ability to move the markets. The sheer size of their trades has the ability to move markets and influence others to follow them driving up both demand and price. These funds also have the fastest equipment in the world, some of the brightest minds in the industry, and access to information that you and I just don’t have. Now, that doesn’t mean these firms don’t take losing positions. Everyone does at some point. But we have shown that when these funds choose to expose millions of dollars of their money to the market, in a very specific manner, they have calculated the risk of the position and firmly believe they will generate a profit, and routinely do. We have tracked the right trades to follow from these traders and have seen that almost all of these trades do, in fact, generate nice profits. So, with unusual options activity, we are essentially just piggybacking on the ideas and research that these firms have done.

So, it's fair to say that these firms are pretty knowledgeable and capable, and fully expect to make a profit on the trades they make. Remember, these are options positions. Options expire. So, these trades have to do what they are expecting within a specified time. It isn't like a common share position that can bounce around. Options positions have to move the right way and in the right amount of time. These traders don't YOLO twelve million dollar trades and just hope they work out. That's just not how they trade.

What Type Of Trades Are We Looking For?

We’re not just following any random, large trades, however. We have to know which ones, specifically, to look for. We are looking for large positions that are aggressively entered. We are looking for the positions that these traders can’t get into fast enough. We are looking for the positions where they don’t even care what price they get filled at, they just want to get in and get in NOW! We're looking for the firms that are actively and aggressively putting their money into the market, in a very specific position. They are showing what they believe in by actually putting their own money into the trades.

How Do We Find These Trades?

Luckily for us, we have a way of seeing these trades being placed, in real time, as they actually execute on the exchanges. There are scanners on the market that try and find this information. We have found the best scanner on the market to showcase this information, and they do it in a way the others can’t. The key is to have real time options data with properly programmed algos to see what trades are being executed on the exchanges. By watching these trades execute live, we can watch when, where, and how these big money traders put their capital to work.

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That alone, doesn't mean every trade they place will generate a profit, though, so we're looking even further into their trades to see what their urgency to open those trades was. THAT'S the key to becoming successful with trading unusual options activity.

The video below will give you a quick look at how we do this. Clicking below will take you to YouTube.

To see our results with Unusual Options Activity trading:

Click here for current trades

And here for closed trades

Why Do Some People Fail With Unusual Options Activity?

Trading with unusual options activity is highly successful. So, why is it that some people just can't make money like this? In my experience with unusual options activity, I have found two key points for why people fail. If you picked up a golf club and swung it for 30 days, would you be on the PGA tour? No. But, for some reason, people think they can start trading and be profitable right away. Trading doesn't work like that. It takes a little time and effort to understand what you're doing and why things work the way they do.

The first group of people that fail are in a rush to make money. They don't truly understand what unusual options activity is all about and follow the wrong trades. People looking for a quick dollar typically aren't profitable in the long run. It does take a little bit of effort (although the material really isn't hard) to understand what it is we're doing and how we do it. A lot of people sign up for an options scanner but then don't put in the time to learn how to properly use it.

The second reason people aren't successful following unusual options activity is because they aren't patient. Patience comes in two forms. One, you need patience to sit and wait for the right trades. They don't come around every day but you have to be ready for them when they do. Second, once you're in a trade, you have to have patience for it to play out. We have seen some of these trades drop from our entry and some people close out the trade for a loss. With the right scanner, though, we can also see when the big money exits their positions. If they have fifteen million dollars exposed and haven't closed out the position for a loss, that is our clue that they still believe in the trade. We have seen a lot of these trades that might drop some initially, go on to make nice profits. We just have to trust the flow, and follow the big money.

What's the next step?

If you want to learn unusual options activity trading from some of the best in the industry, click this link to join the Blackbox Stocks trading team. CLICK HERE FOR 20% OFF YOUR FIRST MONTH WITH BLACKBOX STOCKS If you decide to join them, send us an e-mail and we'll make sure you are in touch with the right people to teach you the ins and outs of this form of trading so you're not trying to learn it on your own. They have a dedicated team to help teach how to be successful with unusual options activity.