What Counts as Unusual Options Activity?

By The Oracle · For education, not financial advice.

Unusual options activity is trading in an option that is far outside that contract’s own normal: volume several times its usual daily average, volume larger than the open interest, or premium that is large for that particular stock, usually piled into one strike and expiry. What does not count: big volume in names that always trade big, heavy trading that a known event explains, and trades that look large but net out, such as spreads, rolls, hedges and dividend trades. “Unusual” means worth a look. It is not a prediction.

There is no official definition

No exchange or regulator defines unusual options activity. Each data provider sets its own thresholds, so one tool’s unusual list can look nothing like another’s. What they share is a comparison: today against what is normal for this contract, or for this stock. The yardsticks below are the ones most screens use in some mix.

The yardsticks

• Volume against its average. Today’s volume in one contract compared with its usual daily volume, often over the last 20 to 30 sessions. Many screens start flagging at several times the average; five times is a common rule of thumb.
• Volume against open interest. Volume above open interest means more contracts traded today than were open at the start of the day. That is the classic flag, because at least part of the trading must have opened new positions.
• Premium against the stock’s normal. $2 million of options is a rounding error in SPY and a major event in a small company. Size only means something next to the name’s usual.
• Concentration. Activity piled into one or two strikes and one expiry stands out more than the same volume spread across the whole chain.
• Aggression. Fills at the ask, and sweeps across several exchanges, suggest a buyer who wanted in quickly and paid for it.
• Repetition. The same contract bought again and again through the day, or the same idea across nearby strikes, says more than one print.
• Time and distance. Short-dated, out-of-the-money contracts need a move soon to pay off, so heavy buying there reads as a sharper bet than buying long-dated contracts already in the money.

What does not count

Plenty of trades trip a volume screen without being the informed bet the word suggests.

• Names that always trade big. SPY, QQQ, index options and the largest stocks print enormous volume every day. Big is normal there.
• Expected events. Volume rises into earnings, product launches and economic reports. Compare with the ticker’s past event weeks, not with a quiet week.
• Spreads. A large buy and a large sale sent as one order can net out to a small position. Read the legs together.
• Rolls. Closing one expiry and opening the next prints as two big trades that mostly cancel each other.
• Hedges. Puts bought against a stock holding, or calls bought to cover a short, are protection, not a forecast.
• Dividend trades. The day before a stock goes ex-dividend, deep in-the-money calls can trade in huge volume between professional traders capturing the dividend. It looks dramatic and carries no view on the stock.
• Selling. A large print filled at the bid is likely a sale: income, a close or a hedge. It is not a bullish bet just because it is a call.

A worked example

ABC passes almost every yardstick. 5,000 contracts is 20 times the contract’s usual volume and more than five times its open interest, so most of the trade must be new. It was bought at the ask and swept across exchanges, and the contract is short-dated and out of the money. That is $400,000 (5,000 × $0.80 × 100) on a stock that has to rise about 12% in under three weeks, to $45.80, for the calls to be worth more than they cost at expiry. It is unusual. That does not make it right.

DEF looks bigger, at 20,000 contracts, but the calls are $60 in the money, they filled at the middle, and it is the day before an ex-dividend date. That pattern fits a dividend trade between professionals. However large it looks, it does not count.

How to check a hit

• Confirm the side. Was it filled at the ask, or at the bid? How to read options flow covers the read in detail.
• Look for the other legs. Check for prints at the same moment and size in nearby strikes or expiries.
• Check the calendar. Earnings, an ex-dividend date or a scheduled event can explain the volume.
• Check open interest tomorrow. If it rose by roughly the size of the trade, the position was probably opened and held overnight.
• Look at the chart. Flow that lines up with the trend and the key levels is easier to make sense of than flow that fights them.

What it can and cannot tell you

Unusual activity tells you that someone committed real money to a specific view, on a specific timeline, in a way that stands out from the contract’s normal. It cannot tell you why, whether the trade is one piece of a larger position, or whether the trader will be right. Every option has a buyer and a seller, and many large, unusual trades expire worthless.

Sometimes unusual trades do come before news, and regulators examine suspicious timing. But most unusual activity is ordinary positioning by funds and traders, and nothing on the tape tells you which kind you are looking at. Use it to choose what to research, then decide on your own analysis and risk. The harder discipline is not chasing every hit, which is how overtrading starts; if that is where you struggle, the free first volume of our Trader Psychology Field Guide is a good place to start.

Finding it in MomoEdge

MomoEdge’s FLOW tab lists notable options trades as they print, with the fill side, the size next to open interest, sweeps and the expiry on one line, and its Flow insights compare each name with a normal day so that busy names stand out. The FLOW feed lesson shows how to read and filter it. The $10K account shows every trade our team takes with real money, winners and losers, before commissions and fees. If you want to scan for unusual activity on live data, you can see what the terminal includes.

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