Is unusual options activity a sign of insider trading?
By Faizan Ahmad. Updated .
Rarely, and the flow almost never tells you which trade it is. The SEC regularly charges people who bought options, usually cheap, short-dated out-of-the-money calls, days before a takeover or other big announcement, and research finds abnormal options volume ahead of about a quarter of takeovers. But the vast majority of unusual options activity is hedging, spreads, rolls and ordinary bets on public information, placed by institutions with no secret at all.
What does insider trading in options look like?
SEC cases follow a remarkably consistent pattern. Three examples from the SEC's own releases:
| Case | What was bought | Timing | Outcome |
|---|---|---|---|
| Semrush (settled May 22, 2026) | Out-of-the-money Semrush calls, among other bullish trades, by a man whose spouse worked on Adobe's M&A team | November 8 to 18, 2025, before Adobe's November 19 deal announcement; Semrush rose 74% | $1,317,233 profit; paid $1,975,850 in disgorgement and penalty, without admitting or denying the findings |
| Pfizer (charged June 29, 2023) | Short-term out-of-the-money Pfizer calls, some expiring the next day, allegedly bought by an employee on the Paxlovid trial | November 4, 2021, the day before positive trial results | Alleged one-day return of 2,458% |
| ADT (charged April 14, 2016) | Thousands of out-of-the-money ADT calls, allegedly bought by a research analyst in his mother's account | Before Apollo's acquisition of ADT was announced | More than $1.5M in alleged profit |
The shared profile: out-of-the-money calls, short expiries, a specific event days away, and a quick sale right after the news. Options appeal to someone with a secret because a small amount of cash can multiply many times if the news lands, which is exactly what that 2,458% figure shows (more on the appeal in why anyone buys far out-of-the-money calls).
How common is it?
A study by Patrick Augustin, Menachem Brenner and Marti Subrahmanyam, published in Management Science in 2019, looked at options trading before 1,859 US takeovers announced from 1996 to 2012. About 25% of the deals had abnormal options volume beforehand, concentrated in short-dated, out-of-the-money calls, and the authors argue more than half of that activity is hard to explain with speculation, rumors or deal predictability. They also note the SEC litigated only about 8% of the deals in their sample.
Read that carefully. It says suspicious options volume shows up before a good share of takeovers. It does not say unusual options volume usually means a takeover is coming. Takeovers are rare; unusual trades show up every trading day.
Why most unusual activity is not insider trading
Compare the SEC pattern with the standout trades on an ordinary day. On October 30, 2026, the unusual bets (size bigger than open interest) looked like this:
| SEC insider cases | Unusual bets on October 30, 2026 | |
|---|---|---|
| Expiry | Days or weeks; some expired the next day | Mostly months or years: Meta February 2027, Amazon September 2027, AMD December 2028 |
| Strike | Out of the money | Often in the money: Citigroup $72.50 and $75 calls at about $46 to $49 a share |
| Company | A takeover target or pending news | Giants like Meta, Alphabet, Amazon and Citigroup |
| Side | Calls bought | A mix, including puts sold at the bid in Seagate and Alphabet |
| Money | Alleged profits from about $60,000 to more than $1.5M | $6.55M to $24.82M of premium per trade |
Large, long-dated, in the money and two-sided is what institutions hedging, rebalancing and expressing views look like. Index options tell the same story: that day they carried a put/call ratio by premium of 1.26, against 0.91 for single stocks, because index puts are where portfolios get insured.
Is it legal to trade on unusual options activity you see?
Yes. Options flow is public market data: every trade is published on OPRA, the consolidated options tape. What the SEC prosecutes is trading on material nonpublic information in breach of a duty to keep it confidential, charged under Section 10(b) of the Securities Exchange Act and Rule 10b-5, as in each case above. Seeing a big print and trading the same contract is acting on public information.
What should you do when flow looks suspicious?
- Check the calendar and the news first. Plenty of aggressive call buying is simply positioning before an earnings date or a known event (see big call buying before earnings).
- Look at the full profile: short-dated, out-of-the-money calls, bought at the ask, size far above open interest, in a company small enough to be acquired. That combination is what draws attention, and it is still usually not insider trading.
- Size it like a lottery ticket, not a tip. Even when the pattern is real, you see it after the fact and don't know the date of the news.
How to see it on Tradytics
On the Live options flow page, set the Expiry filter to near-term contracts and look for calls with the Opening tag and an At ask or Above ask chip: the profile the SEC cases share. Each stock's options page, such as AMD's, lists its largest and unusual orders with size next to open interest. What makes an options trade unusual explains each test.
Common questions
How does the SEC catch insider trading in options?
Through surveillance. In the Pfizer case, the SEC said the investigation came from its Market Abuse Unit's Analysis and Detection Center, which uses data analysis tools to detect suspicious trading patterns.
Is buying calls before earnings insider trading?
Not unless the trader has material nonpublic information and a duty not to use it. Positioning before a scheduled report on public information is ordinary speculation.
Does unusual call buying mean a buyout is coming?
Almost never on its own. Takeovers are rare and unusual call buying is common, so most of it is followed by no deal at all.
Can insider trading show up in puts?
Yes. Bad news can be traded with puts the same way. The three cases above happen to involve calls before good news.
Sources
- SEC: settled insider trading charges in connection with the Semrush acquisition (May 22, 2026): out-of-the-money calls bought before Adobe's announcement, profit, disgorgement and penalty.
- SEC press release 2023-123 (June 29, 2023): short-term out-of-the-money Pfizer calls ahead of the Paxlovid announcement, detected by the Market Abuse Unit.
- SEC Litigation Release 23519 (April 14, 2016): out-of-the-money ADT calls bought before the Apollo acquisition; Section 10(b) and Rule 10b-5 charges.
- Augustin, Brenner and Subrahmanyam, Management Science (2019): abnormal options volume before about 25% of 1,859 US takeovers; SEC litigates about 8% of deals in the sample.
- Most bullish options flow on 2026-11-02: MRVL ($23.33M net), AMZN ($16.59M net), TSLA ($11.89M net), LITE ($6.09M net), PLTR ($4.19M net).
- Most bearish options flow on 2026-11-02: AAPL ($40.79M net), AMD ($20.37M net), MU ($10.50M net), NVDA ($7.78M net), ORCL ($7.77M net).
Updated 2026-11-02 16:06 UTC