How To Read And Trade An Options Alert

How To Read And Trade An Options Alert

For the typical stock trader, the options market may seem complicated and irrelevant when it comes to stock prices. After all, if you’re never going to trade options yourself, why should you care about the options market?

Lots of stock traders watch the options market every day. They may not be trading options, but they want to know what options traders are thinking.

Options traders are typically seen as more sophisticated and advanced than the average stock trader. That generalization is particularly considered to be true when it comes to options traders who place extremely large orders. In other words, when somebody makes a huge bet in the options market that a stock is going to go up or down, stock traders take it seriously.

Benzinga Pro provides real-time alerts to subscribers of potentially market-moving options activity. Here’s an example of a recent options alert and how to read it:

The alert starts out with the stock ticker PSX, which represents a Phillips 66 PSX options trade. “Sept16” is the expiration date of the option contract traded, $75 is the strike price of the contracts and “Puts” represents the type of bet that was made.

“Calls” are bets that a stock’s share price will rise and “puts” are bets that it will fall.

In this case, the trader is betting that Phillips 66’s share price will trade well below $75 by the middle of September.

Related Link: How Do You Trade Options?

Next, a “Sweep” order is a particular kind of option trade that instructs a broker to identify the best prices on the market, regardless of offer size, and fill the order piece-by-piece until the entire order has been filled. Sweep orders may indicate that the trader is prioritizing execution speed over price, a sign that he or she thinks the stock could start moving in a hurry.

“5883” is the order size in our example, but option order sizes can be a bit deceiving. The standard option contract represents 100 shares of underlying stock, meaning that the example trade above represents 588,300 shares of Phillips 66 stock.

“ASK” means that the calls were purchased at the asking price of $1.79/contract. “6010 traded” represents the daily trading volume, and “689 OI” means the contracts have 689 open interest. Open interest is the total amount of option contracts that are currently open.

Finally, “$77.18 Ref.” is the underlying stock’s price at the time of the trade, which provides stock traders with a reference point for any piggyback trading they want to do.

You don’t have to be an option trader to glean useful information from the options market. But of course, as with any type of trading, timing is everything.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Posted In: EducationOptionsMarketsGeneral