What's the difference between Options Flow and Options Volume?

Learn the difference between options flow and options volume, how each works, and how traders can use both to identify unusual options activity.

Suppose you are observing a stock that sees thousands of options contracts traded during the session. The volume rises, calls are being traded actively, and at first sight it appears that the traders are placing a big bullish bet. But is that actually the case? While high options volume indicates that a large number of contracts have been traded, it doesn't show who started the trades, whether positions were opened or closed, or what traders eventually expect the stock to do. This is the key poi…

What Is Options Volume?

T he number of options contracts traded over a certain period—for example, a trading day, an hour, or a shorter intraday interval—is known as options volume. Each completed transaction is counted towards the volume figure, no matter if the trade is establishing a new position or simply closing an existing one. When 1,000 contracts of a specific call option are traded during the day, that option series will have a volume of 1,000 for that session. This is a simple way of measuring volume and is o…

Call Volume, Put Volume, and Unusual Volume

Examining call and put volume can provide an extra dimension to the analysis of options volume, especially when traders look at activity across different strikes and expirations. Increases in call volume tend to draw attention since calls are generally linked with a bullish position, and unusually high put volume also draws attention because puts are usually connected with a bearish position or with downside protection. However, this simple association can be misleading since traders may choose…

What Is Options Flow?

Option flow is a more comprehensive method of examining activity in options trading since it goes beyond simply looking at the total number of contracts traded. Rather than just asking 'How many contracts were traded?', option flow analysis poses questions like: What specific trades took place? How big were they? In which markets were they carried out? What was the amount of the premium? Were there quick executions in a number of markets? Did any single transaction stand out when compared to nor…

Sweeps, Blocks, Premium, and Aggressive Orders

The terms sweeps and blocks often come up in the analysis of options flow. A sweep usually refers to an order-routing method by which an order can look for available liquidity at a number of different venues and may thus carry out transactions against better-priced offers or bids in various markets. The way in which a sweep interacts with the displayed quotes in different options markets is shown in the exchange documentation. In contrast, a block trade usually means a big transaction carried ou…

Options Flow vs Options Volume: Key Differences

The simplest way of understanding the difference between flow and volume is to consider volume as a measure of quantity and to see flow as an attempt to provide context for trading activity; volume tells you how many contracts have been traded whilst flow analysis looks at the characteristics of those trades and tries to spot any activity which might warrant further attention. It is particularly important to note when traders mix up activity with conviction. The fact that ten thousand contracts…

High Options Volume Does Not Always Mean Strong Buying

A frequent error made by newcomers is to notice a very high level of call trading and then immediately suppose that large traders are bullish. Suppose a particular stock is trading at $100; its $105 weekly call usually sees only a few hundred contracts traded each session, but on this day 20,000 contracts are traded. A trader who looks only at the volume figure might therefore conclude that somebody is placing a huge bullish bet. Yet a number of different situations could result in that amount o…

What Options Flow Can Reveal

Options flow can give a more detailed view of activity by dividing the market down into individual transactions. For example, suppose you saw a series of large trades involving the same expiration and nearby strikes, with a substantial amount of premium being exchanged over a short time period; in that case, the pattern would merit more attention than just the fact that total volume had increased during the session. Let us assume that a particular stock is trading at $150. An options flow scanne…

Options Flow vs Options Volume vs Open Interest

Open interest introduces an important third dimension to this discussion. While volume refers to the number of contracts traded over a given period, open interest refers to the number of contracts that are still outstanding . Options flow looks at the characteristics and the context of trading activity. Since these three measures address different questions, they are most useful when they are interpreted together. Take a simple example: if 5,000 contracts are traded today, the volume will go up…

How to Read Options Flow and Volume Together

It is easier to learn how to read options flow if you follow a consistent procedure rather than responding to each large transaction. The first thing you should do is determine whether the contract is actually active in relation to its usual trading pattern. A volume spike which appears impressive on its own might not be very significant if the underlying stock usually trades millions of options contracts. First, compare the current volume with the open interest. Although this does not indicate…

How an Options Flow Scanner Helps

It is difficult to keep a close eye on every options contract, especially since thousands of different strike prices and expirations are actively trading across a wide range of stocks. By using an Options Flow Scanner, the amount of work involved can be reduced because the scanner filters the market to identify transactions that satisfy certain criteria. Rather than spending the whole day looking at the unprocessed trade data, traders can concentrate on activities that are unusually large, unusu…

When Should Traders Focus on Volume?

The use of volume can be particularly helpful when a trader wishes to assess the level of overall participation in a contract or the underlying security. Continuous high volume may show that a specific option series is actively being traded, while a sudden increase in volume can point to a possible change in attention or participation. Volume can also be used when comparing different contracts. For example, if three call options which are close in price have daily volumes of 400, 1,200, and 18,0…

When Should Traders Focus on Options Flow?

Flow data becomes especially useful when one wishes to move from measuring broad activity to carrying out individual trade analysis. It is able to help identify which contracts, strikes, expirations, and transactions are to blame for the increase if a stock suddenly draws in an unusual amount of options volume. For example, suppose that a stock has a total of 100,000 options contracts traded during the day; that figure may seem important, but on its own it doesn't tell you much. A flow scanner c…

Can Options Flow Predict Stock Prices?

No. Options flow cannot reliably predict stock prices on its own. Even exceptionally large trades can be associated with hedging, spreads, portfolio adjustments, closing positions, volatility strategies, or other objectives. A trade that appears bullish from one perspective may be part of a strategy that has a very different overall risk profile. There is also a clear difference between identifying a trade and understanding the full position. A trader might buy calls while at the same time selli…

Common Mistakes When Using Options Flow and Volume

The initial error is to think that a high level of trading activity necessarily indicates substantial buying. Since volume reflects completed trading operations rather than the traders' intentions, a contract with high volume might include opening positions, closing positions, spreads, hedging actions, or a number of participants who have different aims. The other error is to regard all large transactions as being carried out by institutional investors. Although a large block might draw attentio…

Conclusion

To understand the difference between options flow and options volume, you first need to realise that volume shows you how much trading took place, whereas options flow gives more information about the way in which significant trades were carried out and where unusual activity might be taking place. Volume is good for measuring the level of participation and for spotting spikes in activity. Flow can assist traders in looking into individual transactions, including possible notable sweeps, blocks,…