Option Activity Helps Ascertain Directional Sentiment on Stocks

Tom Gentile

Posted in
Daily Report

By: Tom Gentile
August 18th, 2022

3 mins read

Some people are purely stock investors, and they never touch options. Some only trade options as long-term investing drives them crazy. For those in the ‘former’ category they can still gain perspective on potential future direction for a stock based on the options activity on stocks.

When looking at the Morning Reports lists one can see that once in a while an option for a stock can show up on two or more lists. Sometimes there may be a different option for the same stock on the lists.

No matter the same or different options if they are all calls or puts it can give one an assessment where people, investors, and traders, anticipate the stock going.

Morning Reports Lists

Figure 1: Morning Reports List 08/18/2022
Figure 1: Morning Reports List 08/18/2022

American Airlines Group, Inc. has options on three different lists.

The AAL June 16, 2023, $10 Put is on both the Unusually High Put Option Volume list and on the Highest Option Volume list.

The AAL January 20, 2023, $12 Put is on the Highest Option Open Interest list.

The Difference Between Options Volume and Options Open Interest

Option Volume speaks to the number of contracts that happened that day. (or on a particular day).

Open Interest is the number of all contracts on an options strike price that has NOT been closed. It is an open contract, and they could have been opened on a particular day, but more likely over many other previous days.

An option can have low volume on a day but have a large open interest because there are options speculators that have taken positions in the option prior to the day. There can be low Open Interest, but the Volume on the day spikes and shows many more options on the day.

A situation like that means a news item has likely come out that is now spurring interest in the options on a stock, calls or puts.

AAL Options Activity

The type of option seeing this activity for Aal are Put options. Put options are those that give the person buying them to open the right to ‘Put’ or sell the stock to the markets on or before expiration at a specific price.

This is a bearish sentiment as people who buy to open Puts typically expect the stock price to decline in value. That way if the stock trades lower they lock in the right top Put or sell the stock at a strike price higher than the current price to make the difference in current market price to the put option strike price.

App: Toms Option Tools

Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.

Other times I will have other charts may work to amplify my educational points. 

Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.

Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.