How are Net Premiums calculated?
Net prems = (calls bought + puts sold) minus (calls sold + puts bought) IGNORING all spreads. Bought means any position towards, at, or above ask. And sold means any trade at, towards, or below bid. Net premiums paint a comprehensive picture of options flow by taking into account all sides of the flow. We use net premiums extensively in our tools to gauge market sentiment, and create trade ideas.