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I am using Thinkorswim trading platform and came across something I do not understand. The options chain is as seen below with 10 open interest and volume of 315 at strike 55, (added: bid ask spread: 0.40,1.10):

enter image description here

However, the 315 volume breaks down into the Time and Sales transactions as seen below:

enter image description here

From the think or swim training found here: http://tlc.thinkorswim.com/center/howToTos/thinkManual/Trade/All-Products/Options-Time-and-Sales.html it noted that the Green text indicates transaction completion at or above the Ask price while Red is at or below the bid price, however, in the example I am providing the Green text, supposedly representing the Ask price completion is very low, almost spot on to the presented Bid price in the first image.

What I am trying to understand is what this series of transactions represents and whether it indicates a Buy to open (going long) or Sell to open (going short/writing the options)

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I don't use TOS so I can't help you with the nuances of their platform display. But perhaps I can explain some or all, of what you are asked.

To make sense of 315 contracts trading with an Open Interest of 10, you'd have to know yesterday's OI to judge how many of the 315 contracts were closing executions (both sides) versus calls just changing hands. It's not a meaningful piece of data but only an explanation of the disparity between the two numbers.

In the second set of data, other than the last line, all of the trades occurred at the Ask price and were marked green. It's a reasonable assumption that these were all Buy orders but it's not etched in stone that all of them were because one leg of a spread order can be filled at any price. Let's assume they were all Buy orders. Again, not important.

The last fill for 5 contracts at 15:52 is suspicious (red line) because the price jumped along with the IV and delta while the underlying was virtually unchanged. It's very possible that a spread order triggered this aberrant quote and proof of that would be found in another option chain that traded 5 contracts also at 15:52 and away from the market. If you want an explanation of that, ask away but otherwise, accept that it is possible.

The salient point is your question about whether these transactions were "Buy to open (going long) or Sell to open (going short)". As mentioned above, if 310 contracts traded at the Ask price, they were most likely all Buy orders. If so, there is no way to discern the intent of the buyer. They could have been any combination of the following:

Buyers closing existing short call positions

Buyers opening bullish long call positions

Buyers of spreads taking bullish positions or sellers taking bearish positions

Bearish short sellers of stock hedging the upside by buying long calls

I hope that explains what you were asking about and if not, feel free to provide more details and ask away.

  • Thank you. The open interest yesterday/Friday was zero. What I'm seeing here is that is perhaps sell-to-open orders given the fact that all of them occurred near the bid price except the last one occurred near the ask price, that was individual speculating that's something interesting was going on so they are buying to open getting duped. What I think is occurring is number 3 on your list "sellers taking Bearish positions". – Sauron Jul 17 '18 at 2:40
  • My perspective originates from this article: google.com/amp/s/www.bloomberg.com/amp/news/articles/2017-09-21/…, noting line: "options changed hands at 70 cents and 75 cents, or near the “bid,” the market price set by a buyer (the options had a bid/offer spread of 70/95 cents). Normally, when a seller initiates a transaction, he must do it at his counterparty’s terms" – Sauron Jul 17 '18 at 2:46
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    OK, I'm confused by your reply. The last trade at 15:52:57 was for 5 contracts at 80 cents with the B/A at .80 x 1.05 . Why are you saying that was a buy and it occurred at the ask price? The bid is the lower price (sales). Riddle me that one Batman... – Bob Baerker Jul 17 '18 at 2:51
  • I see, is that how you read the market column? (my apologies I only started trading options in the last few days, trying to learn all that I can) – Sauron Jul 17 '18 at 2:54
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    The B/A spread was .40x.45 for 1/2 an hour with the stock in a 12.5 ct range. Then suddenly, the spread widens to .80x1.05 with a trade at .80. That would be normal if good news broke but given that the stock had moved 3 cts down and no more call trades until the close, there was no news. It was either a bad trade, part of a spread being filled, or the MM pulling quotes for the day since everyone else was gone (or was never there in the first place). That trade was a nothing burger. I'll skip the IV and delta explanation since that's likely to be above your pay grade right now. – Bob Baerker Jul 17 '18 at 18:11

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