Indicators of Unusual Options Activity: How to Spot Unusual Flow

Telltale Signs of Unusual Options Flow

Indicators of Unusual Options Activity

There's an endless stream of options activity taking place during all hours of the regular trading session. In order to give yourself a shot at identifying actionable flows you'll want to know what the characteristics of unusual options activity are.

We'll go over some here.

Keep in mind that just because a bit of flow has some or all of these indicators it doesn't necessarily mean it is informed flow. A square is a rectangle, but a rectangle is not a square. In the same vein flows that end up looking like they were the result of informed buying will have some or all of these characteristics, but flows that have some or all of these characteristics won't always be informed buying (or selling).

High Volume to Open interest ratio (Vol/OI)

A high volume to open interest ratio on an options contract can be an indicator of new contracts being opened.

Volume is a tally of how many contracts have been traded today (traded, with no respect to whether they're bought or sold, opened or closed).

Open interest tells you how many total contracts (both long and short) were held from the previous session into today's session.

If open interest is 1,000 and then suddenly 10,000 contracts are traded, in either a single trade or multiple trades, it is very likely that new contracts are being opened (whether they're being bought to open or sold to open is another matter).

Now what is a 'high volume to open interest ratio?' There isn't a set value here. When filtering their flow feeds many traders will simply use the 'volume > oi' option, which will effectively set the Vol/OI filter to 1. By incorporating this filter, along with some of the other ones we'll go over you'll naturally start to observe flows with higher volume to open interest ratios.

Here are 2 examples of options flow with more volume than open interest. The first example will have an extremely high volume to open interest ratio, while the second will have a much more muted one.

NVDA calls, with 24641 volume to 2133 OI. A vol/OI ratio of 11.55. Opened at 6.51 average and closed a week later at 13.35.

MSFT puts, with 1204 volume to 629 OI. A vol/OI ratio of 1.26. Written puts expired at max gain.

July 8, 2025: NVDA 160c 8/8/2025 on X/Twitter @snorlax_uw

October 23, 2024: MSFT 427.5p 11/1/2024 on X/Twitter @snorlax_uw

Higher than average trading activity

A ticker that is observing significantly higher than average volumes (in stock volume, options volume, or both) is of note to flow traders.

The implication here is that institutions or informed traders could be front running a large move for the stock in question.

Sometimes a ticker will have significantly higher than average volume for perfectly innocent reasons. For example a ticker may see significantly high levels of call activity on the day prior to the ex-dividend date, indicative of dividend arbitrage.

Here are 2 examples of tickers that saw significantly higher than average options activity prior to an explosive move.

KLG saw above average options activity in 5 of 6 sessions prior to news that they were being acquired.

INFA saw 19.29x normal options activity back on May 15th. A couple weeks later it was announced that they were to be acquired by Salesforce.

July 9, 2025: KLG Above Average Options Flow (Lookback, not shared live) on X/Twitter @snorlax_Uw

May 23, 2025: INFA Above Average Options Flow (Lookback, not shared live) on X/Twitter @snorlax_Uw

Increases in implied volatility

An increase in a ticker's implied volatility could suggest that demand is driving options prices higher.

When reading the options flow tape often times increases in IV can be observed in tandem with volume, strengthening the case that the activity being seen is indeed 'buying' activity.

Here's an example where you can witness the contract's IV increasing rapidly over a short period of time as additional (likely buy) volume takes place.

The increase in IV on AZN caused these calls to increase in value nearly 10% while there was hardly any change in the price of the underlying. A mere 3 minutes later those contracts were worth .80!

October 11, 2022: AZN Observing increase in IV on X/Twitter @snorlax_Uw

If an increase in IV can be attributed to demand in an option, then a decrease in IV can theoretically be seen in contracts that are being sold/written.

Here's an example of calls likely being sold to open. You can see the IV decreasing, as well as the bid/ask dropping.

NVDA calls, sold to open back in 2023 pre split. Notice how the stock price is still hovering around 426.46 during the 13:49 hour but additional activity on this contract is taking place at lower levels with a drop in IV.

June 29, 2023: NVDA Observing decrease in IV on X/Twitter @snorlax_Uw

Large block orders

Johnny Retail is not placing 10,000 sized trades from his mother's basement. Some fund or desk trading 10,000 contracts raises eyebrows. Jump back to the first indicator: a high volume to open interest ratio. These large block orders will often stand out.

Here are a few examples of large $MSFT block orders, all ~10000 sized, from the last few months. $MSFT reported stellar earnings the prior to the publishing of this article and has hit a new all time high today.

11000x MSFT 450c 8/15, opened May 2 @ 20.10. As of the writing of this article (July 31) position still open and contracts valued at 90.00+ intrinsic.

10000x MSFT 480c 12/19, opened May 8 @ 21.10. As of the writing of this article (July 31) position still open and contracts valued at ~70.00

10000x MSFT 485c 12/19, opened May 14 @ 20.11. As of the writing of this article (July 31) position still open and contracts valued at 66.00+.

May 2, 2025: MSFT 450c 8/15/2025 on X/Twitter @snorlax_Uw

May 8, 2025: MSFT 480c 12/19/2025 on X/Twitter @snorlax_Uw

May 14, 2025: MSFT 485c 12/19/2025 on X/Twitter @snorlax_Uw

Thinking outside the box a little

Trades that have some or all of these characteristics will likely be more indicative of smart money than trades without.

As you get more familiar with flow trading you'll be able to think slightly outside of these guidelines.

We established that a large volume to open interest was something to look for. You can see that on April 25 the ARM calls had a 2639/6 volume to open interest ratio. The following session it was closer to a 1/1 ratio. However given that the open interest on this contract increased the following session (not shown) we know that this position was being added to.

These ARM 2027 calls were one of many 2026/2027 expiration ARM calls that saw repeated activity during the spring/early summer of 2025. Well documented by @snorlax_uw

April 28, 2025: ARM 115c 6/17/2027 on X/Twitter @snorlax_Uw

With some practice you'll be able to analyze the historical volume and open interest data to make evaluations when you don't have a very workable volume to open interest ratio.

Take this PYPL contract: large volume on August 8th, 2024, with nearly a 1/1 volume to open interest ratio. It's not so obvious that these are a new position if you only look at today's data. However if you look further back in the historical data there isn't anything that suggests that a ~4,000 contract position already exists. You'll need to make a few leaps and assumptions when flow trading. Some of these leaps and assumptions will be a little bit bolder than others. PYPL stock went from 65 to 80 by expiration, giving these contracts close to a 4x gain (4.07 → 15.00).

You can use some inference skills to determine that there isn't anywhere in the historical data for someone to have opened a 4000 sized position.

August 8, 2024: PYPL 65c 10/18/2024 on X/Twitter @snorlax_Uw

I hope this article helps you start thinking about the different ways in which you can start scanning the flows.

Thank you as always for reading! REMEMBER!! You can find articles like this and MANY others about Options and the Unusual Whales Platform on the new Information Hub!!

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