Is UOA or option flow really useful?
A lot of people are fans of UOA or Option flow. My question is, how do you really decide your trading based on this? In a marketplace, the number of buyers and sellers is always equal. The number of specific options contracts sold should be equal to the number of options contracts sold. So, how do you or people on television decide stock price direction based on this?
I have also failed to understand the importance of Open Interest (OI). OI is the number of active positions. Open interest will decrease or increase when buyers and sellers of contracts close out their position or when buyers and sellers open more long positions. You see, there are always buyers and sellers involved in a transaction. .
Also, some people consider an option flow is bullish if a huge position is opened at ask or bearish if a huge position is opened at the bid. I have been watching all types of Benzinga option bullish /bearish trades based on this criterion on thinkorswim news. But my observation is price moving after those large options orders are totally random. My understanding is that if this was really that simple people will only use option flow information.
So guys, if you are really successful trading based on options UOA or flow or OI or volume, let us know how you use to consistently make money.
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September 15, 2021 at 12:09PM