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How to Use Thinkorswim to Hunt Down Unusual Option Activity

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How to Use Thinkorswim to Hunt Down Unusual Option Activity


What does Thinkorswim’s Trade Flash do?How To Do Everything With Grain Salt Using Thinkorswim’s Trade Flash Digging Deeper into Thinkorswim’s Daily Options Data

By learning to operate TD Ameritrade’s thinkorswim Trade Flash tool, you can look for signs of unusual options activity within your brokerage platform. While Trade Flash won’t tell you how to trade the activity, it will show you some of the more unusual options activity they’ve seen, which can help you gauge sentiment.

Thinkorswim is great for measuring overall sentiment, but the Trade Flash is a source of information, including some hedges that may hedge large positions in the opposite direction. If you want a clearer, filtered picture of the market’s most unusual options activity (including weekly trading ideas and technical levels in and out), you need Market Rebellion’s Unusual Option Activity Essential.

Still, being a successful options trader is about learning to use all the knowledge, strategies, and tools at your disposal. We would be remiss not to include thinkorswim’s Trade Flash in this list of tools.

What does Thinkorswim’s Trade Flash do?

Trade Flash is a simple, filterable tool that presents a scrolling feed of market information. picture:

Unusual options activity aka “big delta trades”: options trades that meet certain criteria, such as above-normal volume, volume above open interest, high-cost trades in forward OTM or short-term options, etc. Thinkorswim The Trade Flash UOA Scanner will show you whether the trade was a buy or sell, the number of contracts bought or sold, the expiration date, the strike, the underlying stock, the premium paid and the total delta value of the trade as well. Block trades in individual stocks and even overnight futures, which are equally useful in helping market participants gauge sentiment. Recent analyst upgrades and downgrades. Important news such as earnings, suspensions, etc.

For traders who don’t want all of this information or just want a specific subset of information (such as unusual options activity), Trade Flash has a customizable filter that users can use to understand specific data.

Ready to start trading? It is essential to try unusual options activities. Learn how to follow the “smart money” with new UOA trading ideas every week – including skill levels so you know where to enter and exit!

How to use Thinkorswim’s Trade Flash

To access Trade Flash, look for the “Live News” widget that appears by default in the upper left corner of the platform. It looks like this:

Screenshot 2022-07-27 11.56.06 AM

Then tap that little icon in the upper right corner that looks like a little bulleted list, then tap “Toggle Gadget.” This will open the menu you see below, where Trade Flash is a clickable option.

Screenshot 2022-07-27 11.56.55 AM

From here, you’ll see a panel that looks like this:

Since this screenshot was taken during the prerelease market, this panel does not currently contain any unusual options activity.

Since this screenshot was taken during the prerelease market, this panel does not currently contain any unusual options activity.

Now that you have access to the Trade Flash tool, it’s time to filter the results. You can do this by clicking on the icon in the upper right corner that looks like a price tag. This will bring up a menu similar to the one below.

scroll to continue

Screenshot 2022-07-27 9.23.29 AM

From here, you can provide different filter options:

Trade Flash Insights: This includes all your standard market news – stock price action, analyst price targets, earnings releases, and more. Big Delta Trade: This is specifically for option trades that buy and sell above-average deltas. Block Stock Trades: This includes all block trades in stocks. Block Futures Trading: Includes block trades in the futures market. Illiquid options trades: Includes block options trades on the options chain, which otherwise have very low volumes.

You will also see a search bar at the top left of the Trade Flash tool. You can use it to hone specific stocks.

For example, searching for the Taiwan Semiconductor ticker and selecting just “big delta trades” shows this alert – buying a large OTM weekly put option at $0.34 per share with a total negative delta of -102,041.59 (which means a single TSMC A lower dollar would bring buyers of these puts around $102,041.59).

Screenshot 2022-07-27 12.00.01 PM

The gear-shaped icon to the right of that search bar does the same thing, except for the entire list of stocks. You can use it to filter data to stocks in your custom watchlist, specific industries, or even indices like the S&P 500.

eat everything with grain salt

As with anything trading related, a good rule of thumb is to take every piece of information with a grain of salt. Buying TSM puts looks bearish, but this could be a downside hedge bought to protect a larger bullish position. Or, it could be a bearish trade from someone who is about to go wrong. We will never know something about this deal and the person (or institution) who did it.

What we do know is that there are people who feel strong enough about the short-term downside risk to TSM that they are willing to put $195,000 into the possibility of an event. This is not trivial. If you start seeing more and more events with the same name, that should pique your interest.

Dig deeper into Thinkorswim’s daily options data

If you’re starting to get curious, more data can be used to get a clearer picture of option activity in names. To access it, click on a symbol and go to its options chain. This should bring up a list of option expirations, and three tabs at the bottom with information about the options trades in the ticker for the day. These tabs are called Option Statistics Today, Option Timing and Sales, and Product Depth. When you expand these tabs, they should look like this:

Screenshot 2022-07-27 at 12.01.14 PM

Here you can find a cornucopia of useful options data.

In the first part, Option Statistics Today, you will find the following indicators:

The IV percentile, which represents how the current implied volatility of the option chain has historically stacked up against itself. 52 Week IV High and Low Current IVVWAP or Volume Weighted Average Price, representing the average price at which the stock traded throughout the day. The total number of calls and puts traded in this notation, and the total number of options contracts traded in this notion that day. The percentage of total contracts traded at or below the bid price (usually indicating a sell), and the percentage of total contracts traded at or above or above the nominal asking price (usually indicating a buy). The P/C ratio, which represents the ratio of puts to calls traded throughout the day. The Fizz Index, which compares the total number of contracts traded today to the five-day average.

A look at our example from the TSM above shows that, despite the steady rise in stock prices throughout the day, options traders are trading puts to calls at a ratio of more than 3.5. Puts are at 15.958, indicating an increase in put volume, while overall, at 10.14, this shows that options trading is generally higher than today’s volume. We can also see that most options (79%) are trading at or above the ask price. If most options are puts, there is more volume than usual, and they are mostly traded at the sell price, which usually indicates bearish sentiment, which we also saw in the “Great Delta Trade” for the same ticker above. .

But we can draw more information from this page of data. Viewing the tab titled “Option Timing and Sales” will show you all option streams in the relevant stock. You can filter a lot of information using the filter icon (the one that looks like a funnel) in the upper right corner of this tab. For example, you can only display transactions with a volume above 1,000.

For this example, the filter is named as follows.

Screenshot 2022-07-27 12.03.07 PM

You can see two tabs: “Today’s Biggest”, as it sounds – the day’s largest option orders by total price. You can also see “Conditions” on the far right, which essentially indicate the option strategy (if any) used in conjunction with the purchase, such as whether it is a spread or not.

With a slight nuance, you’ll often see spreads in the “Big Delta Trade” alert in the Trade Flash widget. It won’t say “buy with a spread at $XYZ” – instead, you’ll see something like this:

Screenshot 2022-07-27 12.03.21 PM

In the “Great Triangle Trade” alert above, both options trades were made at the exact same time with the same ticker and the same number of trades. This tells us that these are two separate option legs within the same option strategy. The spread above looks like a bearish put debit spread at $62 and sold at a strike price of $58.

Finally, the bottom tab, labeled “Product Depth”, shows a real-time chart of calls and puts for different expirations and different strikes for the day.

Bottom line: Knowledge is power. We know it’s a cliché. But it’s true. The more you know about options, sentiment and news – the clearer your understanding of market behavior, the better trader you will become.

Learn how Market Rebellion harnesses the power of unusual options activity to follow “smart money” and learn how to conquer any market like a pro. Check out our UOA guide to insider trading.

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