How do you screen for bullish option flow from the options block trade screener?
Now that we went over the significance of the different data elements in the option block trade screener, we want to see how we can use the filters to narrow down option transactions indicating trading in a bullish manner. We also use a filter to screen for option trades that are not part of a leg to another trade in order to reduce noisy signals. In addition, we set minimum contract and notional amounts to get transactions that have a sizable amount behind the trade.
Since timing in options is critical (because options expire), we need to try narrow down results that show most potential of upside moves in the very near term. We use a combination of technical indicators, option performance tracking and implied volatility filters to detect evidence of illiquidity to the upside. The idea behind the filters is that the more illiquid a stock is to the upside the less resistance to its movement.