![]() ![]() Before trading options, a good way to get a grasp on them is to start by understanding option alerts. Posted JFiled under Uncategorized by Jonathon Walker Options are notoriously known for being intimidating to strangers-but they don’t have to be. No cash balance or cash flow is included in the calculation.How to Read & Understand Unusual Options Activity Please note all regulatory considerations regarding the presentation of fees must be taken into account. Backtested results are adjusted to reflect the reinvestment of dividends and other income and, except where otherwise indicated, are presented gross-of fees and do not include the effect of backtested transaction costs, management fees, performance fees or expenses, if applicable. Actual performance may differ significantly from backtested performance. Further, backtesting allows the security selection methodology to be adjusted until past returns are maximized. Since trades have not actually been executed, results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity, and may not reflect the impact that certain economic or market factors may have had on the decision-making process. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. Backtested performance is developed with the benefit of hindsight and has inherent limitations. This information is provided for illustrative purposes only. No representations and warranties are made as to the reasonableness of the assumptions. Certain assumptions have been made for modeling purposes and are unlikely to be realized. Changes in these assumptions may have a material impact on the backtested returns presented. General assumptions include: XYZ firm would have been able to purchase the securities recommended by the model and the markets were sufficiently liquid to permit all trading. Backtested results are calculated by the retroactive application of a model constructed on the basis of historical data and based on assumptions integral to the model which may or may not be testable and are subject to losses. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. Backtested performance is not an indicator of future actual results. ![]() This rationale arises from the fact that while selling activity usually pressures the price of a put option down (indicating a bullish sentiment for the underlying asset), an uptick in the contract's price often signifies that buyers, executing "Buy to Open" orders, are more influential, reflecting a predominant bearish sentiment in the market.ĭisclaimer: The TipRanks Smart Score performance is based on backtested results. The volume exceeds the open interest and the closing price of the contract for the day is greater than its closing price from the previous day. This understanding is rooted in the observation that while increased buying activity, especially from those executing "Buy to Open" orders, typically drives the option's price up, a decrease in the option's price often signals that sellers, particularly those with "Sell to Open" orders, have a stronger influence in the market, indicating a bearish sentiment for the underlying asset.įor Put Options: We classify an option contract as having a "Bearish" sentiment when: ![]() The volume surpasses the open interest, and the closing price of the contract for the day is less than its closing price from the previous day. This reasoning stems from the fact that, while increased buying activity generally pushes the price of a put option up (indicating a bearish sentiment for the underlying asset), a reduction in the contract's price often signals that sellers, executing "Sell to Open" orders, dominate the market, hinting at a broader bullish sentiment.įor Call Options: We categorize an option contract as having a "Bearish" sentiment when: The volume exceeds the open interest and the closing price of the contract for the day is less than its closing price of the previous day. In contrast, sellers with "Sell to Open" orders tend to drive the price down.įor Put Options: We classify an option contract as having a "Bullish" sentiment when: This perspective is grounded in the observation that option buyers, particularly those executing "Buy to Open" orders, often contribute to a rise in the option's price. The volume surpasses the open interest, and the closing price of the contract for the day is greater than its closing price from the previous day. For Call Option: We categorize an option contract as having a "Bullish" sentiment when:
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