Option Block Trades Part 1

Option Block Trades Screener Part 1


What is the options block trade screener?


Traders can use the options block trades as a tool to find potential trade ideas. We view an option block trade as an option transaction of at least 200 option contracts or more in a single trade. Of course, there is no way of knowing for sure the intent of the trade. So it is never a good idea just to piggyback a trade. You would want to do further research to try to determine the thesis behind the trade. The option block trade screener gives you additional details and analytics surrounding the trade to help you get more insights.


What are some of the option contract details?


There are a number of additional data elements on the option trade tape, besides the option contract, that can help you gain perspective on an option transaction. By collecting relevant data, you can start to build the puzzle and paint yourself a better picture of what is going on. Let's go over some of the relevant information.


1. Time Stamp: Every trade has a time stamp. This is important because you have a time reference to check other surrounding circumstances around the time of the trade. Was there news right before or after a trade? Was there another option trade or unusual stock volume in the same period? Was there something happening in a related stock or ETF? 


2. Strike vs Spot Price: You want to know the stock price at the moment of the trade so you can compare the spot price to the strike price of the option. This will tell you how far away the strike is from the spot price.


3. Open Interest: The open interest tells you how much open interest in the option contract existed in the morning. Since open interest only gets calculated once a day, it can be helpful to compare todays volume to the mornings open interest to get some insights into the trading activity.  If there is no open interest and you see a big option trade, you may infer that this is a new position because there is no open interest to close out. If you see large open interest and lower volume then it is not possible to tell if the option trades are closing or opening new positions until the next business morning when the new open interest is published.