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Smart Option Flow

Options flow has gained great traction over the last few years. With a booming retail trading market, more people are trying to leverage options flow to gauge market sentiment and get ahead of others. Since millions of options are traded every day, finding solid setups can sometimes be like finding a needle in a haystack. Therefore, one needs to understand the different technicalities of options flow to separate the wheat from the chaff.

Smart Option Flow

Smart Option Flow returns real-time and historical structured data for Unusual Options Activity(UOA), representing anomalies in the Options Order Flow. Usually, the premium of Smart Flow Data trades will be no less than $25K. Data latency is generally within 1 minute.
There are two modes in Smart Option Flow, one is the real-time mode, another is the historical mode. In the historical mode, there is a 15-min delay while this latency is less than 1 minute in real-time mode.

Turn on real-time streaming data in Smart Option Flow

In real-time mode, you can also enable real-time streaming data so you can receive the latest trades without the need to refresh the data.

Historical Mode in Smart Option Flow

In Historical Mode, you can select the date range you would like to choose from. The earliest date you can choose is 3 months ago
You need to provide a symbol in the search box when search the data in the historical mode.

Watchlist

You can add your favorite symbol to the watchlist and filter the smart option flow by using the watchlist.

Filterers and sorters

There are sorters and filters for each column. You can set the maximum and minimum values in the dropdown menu if there is a dropdown trigger icon near the column name.
If you leave blank in the input in the dropdown menu, it will use 0 as the default value.

What are the reasons to avoid blindly following trades based solely on the flow of transactions?

It's important to recognize that a significant portion of the stock market today is controlled by large institutions. These institutions typically adopt a long-term approach, gradually building their stock positions over several months with the intention of holding them for an extended period.
When these institutions sense potential volatility on the horizon, such as an upcoming earnings report or significant news event, they often choose to safeguard against potential downsides by purchasing options. It's crucial to understand that unusual options activity frequently stems from institutional hedging strategies rather than individuals expressing a specific directional view.
The primary reason behind this hedging behavior is that institutions generally aim to retain their existing shares. They hold a long-term perspective on the stock and short-term volatility does not alter their overall outlook. However, since they manage client funds, institutions are cautious about preventing clients from becoming alarmed and withdrawing their investments due to a small loss resulting from a substantial move in a single stock during a particular quarter.
Moreover, institutions face challenges when attempting to sell their positions quickly, as doing so could heavily impact the market and may have tax implications to consider. Considering these factors, institutions find it more advantageous to employ options to mitigate their short-term exposure to a stock rather than resorting to outright share sales.
By utilizing options, institutions can effectively manage risk, protect their long-term holdings, and provide stability to their clients, while avoiding potential market disruptions caused by sudden selling pressure.

Tips on Finding Effective Setups

How to determine the impact of one trade
How to determine the intention of one trade

Current Limitation

  • Smart Option Flow doesn't cover the entire market completely.
  • Any orders with a premium under $25k will be filtered out.
  • Due to technical challenges, some orders might be inadvertently skipped because of the high volume of orders being processed.

Final Thought

Finally, we would like to reiterate that analyzing options flow is more of an art than a science. Please spend time looking at historical patterns and building your own strategies. Options flow contains a rich amount of data that, if used correctly, can immensely improve your trading.