factor · Options
Options flow reveals what informed traders are betting on the next 30-90 days. Heavy call buying with rising implied volatility precedes positive returns; heavy put buying plus put-skew steepening precedes drawdowns. Unusual single-day volume — multiples of open interest — is the strongest variant of the signal.
Options trade with leverage. A directional bet that costs $10k of equity capital costs $1k of premium for the equivalent move via options, so informed traders systematically prefer options for short-horizon expressions of view. The footprint they leave is observable: a sudden 5x spike in call volume on a dormant strike with no equity-side news is somebody who knows something. The factor watches for three patterns — put/call ratio extremes, IV skew shifts, and unusual-volume single-day spikes — and weights them by the depth of the option chain (deep chains are dominated by hedgers, thin chains by directional speculation).
inputs · option chain volumes (puts vs calls)
· OTM put-call implied volatility gap (risk-reversal skew)
· day-over-day volume relative to open interest (unusual activity)
ideas · standardise put/call ratio against ticker's own history
· standardise risk-reversal skew against ticker's own history
· unusual activity adds a signed contribution: bullish if call-heavy,
bearish if put-heavy
· sign-flipped so the factor reads bullish-when-high
output · cross-sectional standardised scoreThree anchors — relative put/call flow, IV skew, unusual-flow detection. The exact threshold for 'unusual', the boost coefficient, and the lookback window for each anchor are calibrated and proprietary. Public anchors: Pan-Poteshman 2006, Cremers-Weinbaum 2010.
Options chain data comes from FMP's options API at a 1-hour cadence during market hours, falling back to end-of-day if the upstream is throttled. Implied volatilities are mid-quote, no synthetic surface fitting. The factor refreshes daily at 06:00 UTC plus an inline pull during the universe sweep when an unusual-flag fires (we don't want to wait until tomorrow to register a 50× volume spike). Strike-level granularity is preserved — we keep the full call+put volume per strike per expiry, then aggregate to the ratio + skew + unusual signals.
Options pairs strongly with Short Interest in the SHORT SQUEEZE SETUP confluence pattern — when extreme short interest co-occurs with sudden bullish call-volume unusual activity, the squeeze trigger is statistically validated by informed flow. Options also reinforces PEAD: heavy directional call flow into an earnings print plus a SUE beat plus continued call flow post-print is a high-confidence drift setup. Bearish options flow into a pharma Phase 3 catalyst is the OPTIONS-PHARMA RISK confluence pattern — informed traders are pricing trial failure ahead of read-out.
Three honest limitations. (1) Hedge contamination. A 10% drop in an underlying triggers index-fund put buying that has nothing to do with company-specific information; we partially mitigate via individual-name vs index-relative skew, but the noise is real. (2) Data freshness. The 1-hour FMP cadence misses intraday flash spikes — a single-bar volume burst won't surface until the next aggregation. (3) Coverage. Small-cap and biotech tickers have thin options markets; the signal is barely meaningful for any name with avg daily option volume under ~5k contracts. We currently only score options for tickers above that threshold; the rest receive a neutral 50.
Every ticker page shows the per-factor decomposition. The Options score is one of thirteen composing the 0–100 the composite score.