Unusual options activity (UOA) occurs when options volume significantly exceeds normal levels or when large block trades appear. These anomalies often signal that sophisticated traders are positioning for an expected move. By scanning for unusual options activity, you can potentially follow smart money into high-probability trades.
What is Unusual Options Activity?
Unusual options activity refers to options trades that stand out from normal trading patterns. This includes exceptionally high volume, large block trades, significant changes in open interest, or activity in options that normally see little trading. These anomalies suggest that someone with capital and conviction is making a bet.
Why it matters: Institutional traders and hedge funds often use options to build positions. Their activity in the options market can telegraph their views before those views are reflected in the stock price.
Key UOA Screening Criteria
Volume to Open Interest Ratio
This is the primary UOA indicator:
- Volume > Open Interest: Today's volume exceeds existing positions
- Ratio > 2: Very unusual, likely new positions
- Ratio > 5: Extremely unusual, significant bet
Absolute Volume Thresholds
- 1,000+ contracts: Notable activity
- 5,000+ contracts: Significant bet
- 10,000+ contracts: Major institutional trade
- Compare to average: 2x+ normal is unusual
Basic UOA Screen
Options volume > 5,000 contracts
Volume/Open Interest ratio > 1.5
Premium > $100,000 total
Days to expiration: 7-60
Underlying stock volume > 500,000
This screens for meaningful unusual activity with significant capital behind it.
Types of Unusual Options Activity
Call Sweeps
Large call orders split across exchanges:
- Buyer wants to fill quickly, indicates urgency
- Often bullish signal
- Look for near-the-money strikes
- Premium paid is usually above mid-price (buying the ask)
Put Sweeps
Large put orders swept across exchanges:
- Can be bearish bet or hedge
- Context matters - check stock position
- Urgency indicates conviction
Block Trades
Large single-fill orders:
- Negotiated off-exchange, then printed
- Typically 10,000+ contracts
- Represents institutional activity
- May be part of larger strategy
Interpreting Options Flow
Bullish Signals
- Call buying above the ask price (aggressive)
- Put selling (collecting premium on downside)
- Call spreads with bullish structure
- Rising call/put ratio
Bearish Signals
- Put buying above the ask price (aggressive)
- Call selling in size
- Put spreads with bearish structure
- Falling call/put ratio
Neutral Signals (May Look Unusual)
- Straddles and strangles (volatility bets)
- Hedging activity (protective puts on long stock)
- Roll trades (closing one position, opening another)
Important context: Not all unusual options activity is directional. Some trades are hedges, spreads, or part of complex strategies. Look at how the trade was executed (bought vs sold) and at what price.
Advanced UOA Analysis
Strike Selection
Where the trade occurs tells you about expectations:
- At-the-money: Highest delta, biggest directional bet
- Out-of-the-money: Lottery ticket or hedge
- Deep ITM: Stock replacement strategy
Expiration Selection
- Weekly options: Short-term catalyst expected (earnings)
- Monthly options: Medium-term view
- LEAPS: Long-term conviction
Premium Analysis
- Total premium paid: Size of the bet
- Break-even price: What price needs to be reached
- Risk/reward: Premium vs potential payoff
Filtering False Signals
Not all unusual activity is predictive:
- Market maker activity: Hedging, not directional
- Earnings hedges: Protective, not predictive
- Index-related: ETF arbitrage activity
- Roll trades: Position management, not new bets
Quality Filters
- Focus on single-leg orders (not spreads)
- Look for aggressive fills (at ask for buys)
- Require minimum premium ($50k+)
- Check for repeat activity in same name
Comprehensive UOA Screen
A complete unusual options activity scanner:
- Single stock options (not index/ETF)
- Volume > 3,000 contracts
- Volume/OI ratio > 1.5
- Premium > $50,000
- Expiration: 7-45 days out
- Strike within 15% of current price
- Underlying average volume > 1 million shares
- Trade marked at ask (for calls) or bid (for puts sold)
Trading UOA Signals
Entry Approach
- Wait for confirmation (second day of activity)
- Enter similar strike/expiration as unusual trade
- Or trade the underlying stock instead
- Size position based on premium willing to risk
Risk Management
- Never risk more than 2-3% of portfolio on UOA trade
- Set time-based stop (exit if no move within days)
- Take profits on 50-100% gains
- Remember: smart money is wrong sometimes too
Tools for Scanning UOA
Sources for unusual options activity data:
- Brokerage platforms with options screeners
- Dedicated options flow services
- Free resources like Barchart unusual options
- Social media traders sharing flow (verify independently)
Track Your Options Trades
Pro Trader Dashboard helps you track all your options trades. Analyze your entries based on unusual activity and see which signals work best.
Summary
Unusual options activity scanning helps identify when smart money is making significant bets. Focus on trades with high volume relative to open interest, meaningful premium at stake, and aggressive execution (buying at the ask). Filter out hedges, rolls, and market maker activity. Remember that unusual activity provides an edge but is not a guarantee - institutional traders lose money too. Use UOA as one input in your trading decisions, combined with technical and fundamental analysis.
Learn more: open interest explained and volume analysis.