What Is Unusual Options Activity?
Put simply, Unusual Options Activity (UOA) represents anomalies in the Options Order Flow (i.e. the 6M+ options contracts traded on a daily basis).
We call these anomalies Unusual Options Activity, and oftentimes, this unusual activity serves as a leading indicator ahead of a large movement in the underlying stock.
How to Identify Unusual Options Activity
There’s no single definition for Unusual Options Activity, but below are a few key characteristics that have proven to be indicative of large upcoming movements:
Single options contract with large volume compared to the average contract size
- In other words, a large concentration in a single contract
Large spike in options volume compared to the daily average
- Up to 5-10 times more than the daily average
Short expiration time frame
- This implies an expectation of a quick movement happening before the expiration date
Far out of the money
- The strike is very far from the spot rate, implying an expectation of a large movement
Large increase in open interest
- This indicates a new or “fresh” position
