Does following unusual options activity work?
By Faizan Ahmad. Updated .
Not as a standalone buy or sell signal. Research shows options volume can carry real information, but the part that predicts prices comes from knowing who opened new positions, which no public feed shows, and many big trades are hedges, spreads, rolls or closing trades that only look like bets. Used as context, flow is genuinely useful: it tells you where real money is committed, how much and by when, which helps you test an idea rather than replace one.
What does the research say?
The best-known study, a 2004 NBER working paper by Jun Pan and Allen Poteshman, used a special Cboe dataset of options volume initiated by buyers to open new positions. Stocks with low put/call ratios on that measure beat stocks with high ones, on a risk-adjusted basis, by more than 40 basis points the next day and more than 1% over the next week. The authors traced the edge to non-public information held by option traders, not to a market inefficiency anyone could harvest.
That detail is the catch. Their data knew who bought and whether the trade opened a position. The public options tape doesn't: it carries price, size, time and exchange. Flow tools infer the side from where a trade filled against the bid and ask, and infer opening from size versus open interest. Cboe sells the real breakdown (buy or sell, open or close, by type of trader) as a separate dataset for its own exchanges.
A second study, of 1,859 US takeovers, found abnormal options volume before about 25% of them. Informed trading exists, but it clusters in a narrow setting, short-dated calls on takeover targets, and you can't tell in real time which prints are the informed ones (more on insider trading and options).
Why do so many unusual trades mislead?
- Hedges. A fund buying index puts to protect a stock portfolio may be bullish on everything it owns. On October 30, 2026, the largest QQQ order was 30,750 June 2027 $680 puts for $123.40M, bought into a 3.16% drop: textbook insurance (see how to tell a hedge).
- Structures. The single biggest options print that day was 1,000 SPX $12,000 puts expiring December 18, 2026, for $438.98M, with the index at 7,588.92. That put was about 4,411 points in the money, so its price was essentially all intrinsic value. A trade like that is a piece of a larger position or a financing trade, not a $439M bet on a crash.
- Spreads. At 10:42 AM, 5,000 SPX $7,000 calls ($348.68M) and 5,000 SPX $8,000 puts ($186.77M) with the same expiry printed together as blocks. Read separately, one looks like a giant bullish bet and the other a giant bearish one. Together they are one position whose direction depends on which legs were bought.
- Closing trades. When size is below open interest, a "big buy" can be someone covering a short (opening vs closing).
- Guessed sides. Trades near the midpoint can't be called either way, and sides inside multi-leg orders are unreliable.
Did the flow work on October 30, 2026?
On October 30, 2026, the whole market's large prints leaned bearish (net -$86.53M) and the S&P 500 fell 1.59%. Here are the names with the strongest leans, and what each stock did that day:
| Most bullish net premium | Stock that day | Most bearish net premium | Stock that day |
|---|---|---|---|
| C $93.80M | -2.6% | MSTR -$44.61M | -6.7% |
| GOOGL $58.61M | -0.8% | TSLA -$32.94M | -0.8% |
| MRVL $31.01M | -9.4% | AMD -$28.20M | -10.3% |
| META $23.40M | -1.7% | TSM -$26.42M | -5.3% |
| NVDA $19.61M | -3.9% | CRWD -$20.89M | -4.0% |
| TER $17.47M | -7.0% | BE -$15.40M | -8.0% |
The bearish six did fall further on average (5.9% against 4.2%), but all twelve stocks fell. And a same-day score is the wrong test anyway: the biggest Citigroup calls behind that $93.80M expire December 18, so whether they worked won't be known for weeks. Be wary of anyone who grades flow by the next candle, or shows you only the winners.
When does unusual activity help, and when doesn't it?
| How you use it | Does it work? | Why |
|---|---|---|
| Copying single alerts | Poorly | You don't know the trader's full position, cost or exit, and many prints are hedges or legs |
| Checking your own idea | Often helpful | Fresh, aggressive money on your side, or against it, is real information |
| Reading market mood | Useful | Net premium and index put buying show how nervous big holders are |
| Following repeat buying across days | Better than one print | Several sessions of opening trades at one strike are hard to explain away |
| Earnings plays | Mixed | Options already price the expected move; a buyer can be right on direction and still lose to IV crush |
How to use it without getting burned
- Start with your own reason to trade, and use flow to check it.
- Favor opening trades (size above open interest) filled at the ask or the bid, not the mid.
- Read the whole structure: other legs printed at the same second change everything.
- Weigh the dollars against the stock's normal options volume.
- Match horizons: a 2027 hedge says nothing about this week.
- Don't chase after the stock has already moved (why flow alerts seem late).
- Size small. The other side of every trade is often a professional.
How to see it on Tradytics
On the Live options flow page, the Opening tag, the side chips and the Spread and Complex tags cover most of the checks above. When a print still looks ambiguous, ask the AI analyst: it pulls the trade's context and says whether it reads as a hedge, a spread or a fresh bet. The Free plan shows yesterday's session, which is enough to learn how flow behaves before deciding whether live data is worth paying for (is paying for options flow worth it?).
Common questions
What percentage of unusual options trades make money?
There is no trustworthy public number. A win rate published without the full list of trades, losers included, isn't evidence.
If following flow worked, why would anyone sell the data?
Fair question. Flow data is a tool, like a chart: it shows you the tape faster and cleaner, but the judgment is still yours. Nobody honest is selling a guaranteed signal.
Is unusual put buying a warning sign?
Sometimes, but index put buying is mostly insurance. On October 30, 2026, index options carried a put/call ratio by premium of 1.26 against 0.91 for single stocks.
Do big traders get it right more often?
They have more information, but they also hedge, and a hedger is happy when the insurance expires unused. Copying a hedge as if it were a bet is a common way to lose.
Sources
- Pan and Poteshman, NBER Working Paper 10925 (2004): put/call ratios built from buyer-initiated opening volume predict next-day and next-week stock returns, driven by non-public information.
- Cboe DataShop: Open-Close Volume Summary: the separate dataset that tags trades as buy or sell and open or close, by participant type.
- Augustin, Brenner and Subrahmanyam, Management Science (2019): abnormal options volume before about 25% of 1,859 US takeovers.
- Most bullish options flow on 2026-11-02: MRVL ($22.96M net), AMZN ($15.87M net), TSLA ($12.21M net), LITE ($6.09M net), PLTR ($4.27M net).
- Most bearish options flow on 2026-11-02: AAPL ($40.91M net), AMD ($20.61M net), MU ($10.90M net), ORCL ($7.78M net), NVDA ($7.78M net).
Updated 2026-11-02 16:03 UTC