On Monday, shares of Taiwan Semiconductor (NYSE: TSM) saw unusual options activity. After the option alert, the stock price moved up to $80.39.
- Sentiment: NEUTRAL
- Option Type: SWEEP
- Trade Type: CALL
- Expiration Date: 2020-08-21
- Strike Price: $80.00
- Volume: 1861
- Open Interest: 4760
3 Indications of Unusual Options Activity
Exceptionally large volume is one way options activity can be considered unusual. The volume of options activity refers to the number of shares contracts traded for a day. Open interest describes unsettled contracts that have been traded but not closed by a counter-party. In other words, for each contract buyer, there must be a seller. A purchased contract remains open until a seller closes it, and vice versa.
Another gauge of unusual options activity is a contract with an expiration date in the distant future. Additional time until a contract expires generally increases the potential for it to grow its time value and reach its strike price. It is important to consider time value because it represents the difference between the strike price and the value of the underlying asset.
Contracts that are “out of the money” are also indicative of unusual options activity. “Out of the money” contracts occur when the underlying price is under the strike price on a call option, or above the strike price on a put option. These trades are made with the expectation that the value of the underlying asset is going to change dramatically in the future, and buyers and sellers will benefit from a greater profit margin.
Understanding Sentiment
Options are “bullish” when a call is purchased at/near ask price or a put is sold at/near bid price. Options are “bearish” when a call is sold at/near bid price or a put is bought at/near ask price.
These observations are made without knowing the investor’s true intent by purchasing these options contracts. The activity is suggestive of these strategies, but an observer cannot be sure if a bettor is playing the contract outright or if the options bettor is hedging a large underlying position in common stock. For the latter case, bullish options activity may be less meaningful than the exposure a large investor has on their short position in common stock.
Using These Options Strategies
Unusual options activity is an advantageous strategy that may greatly reward an investor if they are highly skilled, but for the less experienced trader, it should remain as another tool to make an educated investment decision while taking other observations into account.
For more information to understand options alerts, visit https://pro.benzinga.help/en/articles/1769505-how-do-i-understand-options-alerts
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
"activity" - Google News
August 17, 2020 at 10:31PM
https://ift.tt/2PZPqth
Unusual Options Activity Insight: Taiwan Semiconductor - Benzinga
"activity" - Google News
https://ift.tt/3ddCXMh
https://ift.tt/2WkO13c
Bagikan Berita Ini
0 Response to "Unusual Options Activity Insight: Taiwan Semiconductor - Benzinga"
Post a Comment