From Noise to Signal: Filtering Options Flow for High-Conviction Trades
Trading isn't just about spotting patterns—it's about understanding what really matters. Every day, options flow data floods in, revealing who’s buying what, and in what quantity. But here's the catch: most of it is just noise. If you've ever wondered how to separate the useful from the useless and find real trading insights, you're in the right place. What is Options Flow, Anyway? Think of options flow as a behind-the-scenes peek into what the big players are doing. It tracks the volume and size of options trades happening in real time. This includes unusual activity—like sudden spikes in call or put buying—and can give clues about potential moves in the underlying asset. But there’s a problem. Not every large trade is a smart trade. And not every smart trade is obvious. That’s why filtering is key. Why Most of it is Noise The raw data is overwhelming. Thousands of trades per minute. Some are simple hedges. Others are misdirection. And some are just… bad ...