Options Flow: Pieces of the Puzzle

By now, I hope you've seen my options flow checklist. It is based on 7 years of studying options flow and really is the formula for finding high probability trades. There are a few things that I look for when looking at the scanner. The checklist lists them: aggressive buying, specific contract, ask side, sweeps, contract price being driven up, significant dollar amount, no solo blocks, among other things. What I want to emphasize today, is that each of those listed criteria are just single pieces of the puzzle.

If you think about a puzzle, you have many pieces. Each piece shows a part of the overall picture but by itself, doesn't show you everything. Think of the options flow checklist in the same manner. Each criteria is a piece of the puzzle that needs to be evaluated, but by itself, won't give us enough information to trade on.

So as an example, I look for sweeps to be a part of the trade. This is showing me more of an urgency to open the position. However, if you were to isolate some options flow and ask me, "These are all sweeps, should we follow it," there's no way I can answer that. Remember, being sweeps are just one piece of the puzzle. So, while it is important to see them, if that's the only information we have, we don't have all of the info we need to place a trade.

Another criteria is a high dollar amount. This ensures we are following a being money trader. However, if you just ask me, "This flow is for $3,000,000, should we follow it," remember, the dollar amount is just one piece of the puzzle. So, just having the info on how much the trade was for isn't enough info for me to follow into it. If it is a big dollar amount, but a single line of flow that happens to be a block, I am ignoring it. So, the dollar amount alone is a piece of info that I need to see but by itself doesn't tell me everything I need to know to follow into a trade.

One last example, would be aggressive buying. Again, just a single piece of the puzzle. So, if you were to ask me, "hey, this looks like aggressive buying, should we follow into the trade," there's no way for me to answer that. I need more info, than JUST the aggressive buying.

So, remember, if you have puzzle pieces laid out in front of you, each one of them makes up a part of the total picture. But, any single piece doesn't tell you the story. So when it comes to options flow, make sure you are looking at every piece of the puzzle to determine if some flow is high probability or a complete guess.

There is a lot to look at, it can be overwhelming for new options flow traders. But remember, I'm available in the discord room from bell to bell, every day, to answer any questions you have.

Happy Trading!