If you are interested to know about Unusual Options Activity (UOA), then you are in the right place. This brief guide will help you understand the basics of UOA better.
UOA is the anomalies that occur in Options Order Flow. However, many of you often confuse it with unusual activity but. In simple words, they are not the same. To get into unusual options trades, you need to first understand the concept.
Options order flow is the real-time transaction that takes place in the Options markets.
Why trade Unusual Options Activity?
A large volume of daily trades in the options market is generated by hedge funds, institutions, traders, and private investors. They make use of advanced strategies to win the market.
By tracking this group and their daily activities can give you important insights into smart money and what it is doing to a given stock or the whole market. You can also get many benefits by tracking this info. To put it in simple words, you will get a lot of great trade ideas.
Things To Know Before You Get Into UOA
Here are a few important things or facts you should know, before getting into UOA:
- You should use UOA to supplement a strategy that is already there. In other words, you should have the main trading strategy which should be backed by UOA.
- You shouldn’t rely on the smart money always as they can get it wrong too. This is why you need to be realistic, instead of being greedy.
- UOA is not science and therefore, it is subjected to a lot of “trader’s intuition”.
- Trader’s intuition and experience are very important in deciding which UOA trades to go for. When you have more experience in the field, you will be able to trade better.
- Knowing the true intent of a buyer is never possible.
- In the majority of the cases, the ones who initiate a trade sit back on a drawdown longer.
If you want to get into UOA make sure that you have a core trading strategy in place. UOA should be used as an additional tool.