Track 02Module 4 of 67 sources
Options flow: reading what others are doing
Interpret unusual option activity honestly, separating informed bets from hedges, rolls and spread legs.
Key ideas
- Option volume carries information about future stock returns, but mostly in data on who opened the position. Public flow is a noisier version of that.
- Volume far above open interest suggests new positions. It does not tell you whether the initiator bought or sold.
- Most large prints are hedges, rolls or one leg of a spread. Start with the boring explanation.
- Retail option buyers lose most around earnings, where implied volatility is richest.
Start hereWatch or read these first. They carry the core idea.
🚨CRUCIAL🚨 Options Flow Concepts You NEED to Know to be a Better Trader
Video · Unusual Whales · 6:55
The vocabulary of flow: sweeps, blocks, opening against closing, bid side against ask side.
Paper
The Information in Option Volume for Future Stock Prices
Pan, Poteshman · 2006 · Review of Financial Studies · doi:10.1093/rfs/hhj024
The key paper. Put-call ratios built from opening buy volume predict returns. Publicly visible volume predicts far less.
Tool
CoreThe standard references. Work through them once the idea is clear.
How To Follow Large Option Order Flow | Unusual Whales Options Flow Tutorial
Video · TC Trading · 11:24
A practical walk through following large orders.
Paper
Retail Trading in Options and the Rise of the Big Three Wholesalers
Bryzgalova, Pavlova, Sikorskaya · 2023 · The Journal of Finance · doi:10.1111/jofi.13285
Who takes the other side of retail option orders, and what that costs retail.
Paper
Losing is optional: retail option trading and expected announcement volatility
de Silva, So, Smith · 2025 · Review of Finance · doi:10.1093/rof/rfaf052
Retail traders lose on options around earnings because they overpay for volatility.
Tool
Unusual Whales: options flow and dark pool data
Unusual Whales
A paid flow service. Useful for learning how prints cluster.
Practice
Take three entries from the Desk's unusual activity table. For each, write the most boring explanation first. Check the stock one week later and keep score.
See it live
Where this leads
02.3 · Options and Options FlowDealer positioning: gamma, vanna, charm and pinningExplain how dealer hedging can dampen or amplify moves, and read a gamma exposure estimate with the right amount of doubt.08.2 · Risk, Losses and ProcessWhy most traders lose: the evidenceKnow the base rates for retail trading so that your plan starts from reality.