![]() An observer cannot be sure if the bettor is playing the contract outright or if they're hedging a large underlying position in a common stock. ![]() Options are "bearish" when a call is sold at/near bid price or a put is bought at/near ask price.Īlthough the activity is suggestive of these strategies, these observations are made without knowing the investor's true intentions when purchasing these options contracts. Options are "bullish" when a call is purchased at/near ask price or a put is sold at/near bid price. These trades are made because the underlying asset value is expected to change dramatically in the future, and the buyer or seller can take advantage of a greater profit margin. This occurs when the underlying price is under the strike price on a call option, or above the strike price on a put option. Time value is important in this context because it represents the difference between the strike price and the value of the underlying asset.Ĭontracts with a strike price far from the underlying price are also considered unusual because they are defined as being "out of the money". ![]() Generally, additional time until a contract expires increases the potential for it to reach its strike price and grow its time value. The trading of a contract with an expiration date in the distant future is another sign of unusual activity. A contract cannot be considered closed until there exists both a buyer and seller for it. The number of contracts that have been traded, but not yet closed by either counterparty, is called open interest. The volume of options activity refers to the number of contracts traded over a given time period. One way options market activity can be considered unusual is when volume is exceptionally higher than its historical average. Following the unusual option alert, the stock price moved down to $33.12. Shares of AMC Entertainment (NYSE: AMC) saw some unusual options activity on Monday. ![]()
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