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 with the expectation that the value of the underlying asset is going to change dramatically in the future, and buyers and sellers will benefit from a greater profit margin. "Out of the money" contracts occur 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 to consider because it represents the difference between the strike price and the value of the underlying asset.Ĭontracts that are "out of the money" are also indicative of unusual options activity. Usually, additional time until a contract expires allows more opportunity for it to reach its strike price and grow its time value. These contracts are not yet closed because a buyer has not purchased the contract, or a seller has not sold it.Īnother sign of unusual activity is the trading of a contract with an expiration date in the distant future. The number of unsettled contracts that have been traded, but not yet closed, 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 up to $61.79. Shares of AMC Entertainment (NYSE: AMC) saw some unusual options activity on Friday.
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