Options volume is one of the most basic yet important metrics in options trading. It tells you how actively a particular option contract is being traded. Understanding volume helps you find liquid options, spot unusual activity, and avoid getting stuck in positions you cannot exit easily.
What is Options Volume?
Options volume is the number of contracts traded during a specific time period, usually one day. It resets to zero at the start of each trading day and accumulates as trades occur throughout the session.
Simple definition: Volume counts how many times that option contract changed hands today. If volume is 5,000, it means 5,000 contracts (representing 500,000 shares) were traded so far today.
Volume vs Open Interest
Volume and open interest are related but different:
- Volume: How many contracts traded TODAY. Resets daily.
- Open Interest: How many contracts currently exist. Carries over day to day.
Example: Volume vs Open Interest
AAPL $200 call at market open:
- Volume: 0 (no trades yet today)
- Open Interest: 50,000 (contracts outstanding from previous days)
By end of day:
- Volume: 8,000 (contracts traded today)
- Open Interest: Could be anywhere from 42,000 to 58,000 depending on whether trades opened or closed positions
Why Volume Matters
1. Liquidity Indicator
High volume usually means better liquidity. More trading activity generally leads to tighter bid-ask spreads and easier order execution. You want to trade options where other people are trading.
2. Easier Entry and Exit
In high-volume options, you can get in and out of positions quickly at fair prices. In low-volume options, you may have to accept a worse price or wait a long time for your order to fill.
3. Market Interest Signal
Rising volume often signals increasing interest in a stock or a particular price level. When volume spikes on specific strikes, it may indicate that informed traders are making bets.
4. Confirmation of Price Moves
A price move accompanied by high volume is more significant than one on low volume. Volume confirms that traders are committing real money to the move.
Rule of thumb: Look for options with daily volume of at least 100 contracts for decent liquidity. For active trading, aim for 500+ volume to ensure smooth execution.
Reading Volume on an Options Chain
Most options chains display volume in a dedicated column. Here is what to look for:
Example: Options Chain Volume
Stock XYZ at $75:
- $70 call: Volume 150, Bid $6.00, Ask $6.10
- $75 call: Volume 3,500, Bid $2.45, Ask $2.47
- $80 call: Volume 2,800, Bid $0.85, Ask $0.88
- $85 call: Volume 45, Bid $0.20, Ask $0.30
The $75 and $80 calls have good volume and tight spreads. The $70 and $85 calls have lower volume and the $85 has a wide spread (50% of the bid price).
Unusual Options Volume
One of the most valuable uses of volume is spotting unusual activity. When volume spikes significantly above normal levels, it could indicate:
- Institutional activity: Big players making large bets
- Upcoming catalysts: Informed traders positioning before news
- Hedging activity: Large stock holders protecting positions
- Speculation: Retail traders piling into a popular name
How to Identify Unusual Volume
Compare current volume to average daily volume. Many traders look for:
- Volume at least 2x the average daily volume
- Volume exceeding open interest (very unusual)
- Volume concentrated in specific strikes or expirations
Example: Unusual Volume Alert
Stock ABC normally trades 500 options contracts per day on its $50 calls. Today by noon:
- $50 call volume: 15,000 contracts
- Open interest: 8,000 contracts
This is highly unusual - volume is 30x normal and nearly double the open interest. Someone is making a significant bet.
Volume Patterns to Watch
Call Volume Surge
Heavy call buying can signal bullish expectations. Watch for call volume significantly higher than put volume (high call/put ratio).
Put Volume Surge
Heavy put buying can signal bearish expectations or hedging activity. Large put volume before earnings might indicate concern about downside.
Volume at Unusual Strikes
When far out-of-the-money options see heavy volume, it could indicate traders expecting a big move in that direction.
Volume Near Expiration
Volume often increases in the final week before expiration as traders adjust or close positions.
How to Use Volume in Your Trading
Before Opening a Position
- Check that volume and open interest are adequate
- Compare bid-ask spread as a percentage of the option price
- Consider whether you can exit if the trade goes against you
For Scanning Opportunities
- Screen for unusual volume to find potential trades
- Look for volume breakouts at specific strikes
- Monitor call/put volume ratios for sentiment signals
For Confirmation
- High volume confirms conviction behind price moves
- Low volume on breakouts suggests the move may not sustain
Track Volume on Your Trades
Pro Trader Dashboard helps you analyze your trading patterns. See if your best trades came in high or low volume environments and optimize your approach.
Common Volume Mistakes
- Trading illiquid options: Getting stuck in positions you cannot exit
- Ignoring the spread: High volume does not guarantee tight spreads (always check both)
- Chasing unusual volume blindly: Not all unusual activity is smart money
- Using volume alone: Always combine with price action and other metrics
Summary
Options volume tells you how many contracts traded today. High volume indicates active trading and usually better liquidity. Unusual volume can signal informed trading activity or upcoming catalysts. Always check volume before trading to ensure you can enter and exit positions easily. Use volume alongside open interest, bid-ask spreads, and price action for the complete picture.
Learn more about open interest or read our guide on bid-ask spreads.