HomeOptionFlowOptionFlow-reportsSPY – AAPL – USO – GLD 3-5-16

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SPY – AAPL – USO – GLD 3-5-16 — 6 Comments

    • You don’t. You’ll never know for sure what the trader’s objective is behind the trade. But by filtering out the trades that were at or above the ask, we can assume that these were “buy” trades, and not “sells”. Thereby exposing a bias. Whether its a hedge or not imo is of lesser importance. An option hedge is a shortterm protection against a longterm investment. Since we only look at front end and next week exp. Then a “hedge” trade of this nature, would have to be a substantial fear that the market will move in the direction of the option trade, at least short term.

  1. Thank you Peter. Lastly, would you kindly explain the importance of “at or above the ask”? Why would anyone pay more than the ask?

    • To make sure they get a fill. On SPY the spread is thin, usually no more then a penny or two. So buying at the ask or maybe a penny higher gets you a better chance for a fill. Supply and demand, you want something bad enough you pay the asking price. Weekly options move very fast, by the time you push the buy button, it might have moved a penny already.

    • Not only that, you see that these large trades are sometimes tens of thousands of contracts, not that I have experience placing these kinds of trades (wish I did), but you can imagine for those trades to complete, you need to be at the ask side of the trade.

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