Using flow data to make profit - Strategy in Testing (UPDATE)

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MasterSteve

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@MasterSteve I was looking at the Jan 17 Puts in SPY. o_O 😱 Was just snooping around. Sheesh! I bought one in my paper account just for kicks. I bought one OTM at the 240 Strike yesterday.
I meant bullish move just for FIS. That's pretty far OTM, maybe for a hedge?
 
M

MasterSteve

Active member
VIP
Anyway we can get this put/call chart or at least the formula used to plot the call volume and the put volume? Thx
And for @MBF. I found a trader with this script in a discord group I recently joined and was able to get him to explain it to me. This is from Signet from the Pro Option Education Discord group.

"
PUT / CALL Graph This study is a bit tricky to use and the settings are gonna seem a little complex at first, but once you get comfortable with it you will come to love it.

I like to set it on a 1 minute chart with other indicators like Cumulative TICK. To set the date, the format is YEAR | Month | Day & the day is always the NEXT DAY after the date you see.

Example, if I want to set this on Facebook, I know that Friday is the last trading day for the options. I would need to set the date one day later for Saturday. This study is looking back @ a lot of options series & finds the aggregate.

PUT / CALL Graph
+ ( http://tos.mx/7Tck6mY )

PUT / CALL Graph (Single Series) This is the same study, but only looks for a single expiry. + ( http://tos.mx/voWo7Hb )

ThinkScript study_20191020

ThinkScript study_20191020

Tip: watch how you set the date

Year, month, day.

Options are only gonna be intraday while market is open
"

I've spent some time messing around with the graphs tonight on OnDemand thinkorswim and can answer some basic questions if you have any with it. It takes a little bit to load after you put it in and you can mess with some of the settings to look at exactly what you're interested in. Hope this helps.

Steve
 
M

MasterSteve

Active member
VIP
@MasterSteve 1st off, thank you for your contribution.
I started to look into Flow after reading your thread. There's not much out there.
I hope you can help me understand
  • How do you apply flow data to Options trade decision? Thought process...
  • Easy explanation for Block/Sweep/Split

T.I.A
I want to make sure you (or anyone else new to this) have a basic understanding of block/sweep/spread orders before we go too far into applying flow data to options decisions. So, read these three investopedia articles and let me know if you have any questions on any type.

Block Order:


Sweep Order:


Basic Spreads:


I'll show you an example of applying flow data and my thought process to the FIS play we both noted earlier today, attached to the other post.
 
M

MasterSteve

Active member
VIP
Thanks, @MasterSteve - get well first. i was just hoping that my question make sense lol
i looked into some vid on youtube about UOV but all of them lead to 'buy my scanner' at the end.
the free scans only show PUT/CALL but not opening or closing.

Ex: I'm seeing this today
BUY +8,800 FIS 100 15 NOV 19 130 CALL @2.25 LMT
current price is $125

Does this mean we should expect bullish direction?
The free scans or even the trading groups that have flow for $20-$60 a month usually only have PUT/SCAN attached to the flow, that's correct. While that does show one side of the trade, it doesn't show the full move. I prefer to see the actual trade on the trade tape so I can see more information.

For example, the FIS play today. At 10:27 am PST there was a 8,800 QTY FIS NOV 15, 2019 130 CALL @2.25 LMT order. But looking further at that particular play on a trade tape, you can see two things. First, that play is below the bid price (the maximum price that a buyer is willing to pay for the security), usually meaning that it was sold. Selling a load of calls looks like a downside or a taking profit play. But second, we can also see that it was part of a call spread. We come to that conclusion because of the second entry at the same time, 8,800 QTY FIS NOV 15, 2019 125 CALL @ 4.85 LMT order. That play was bought above the market spread, usually meaning a buy because it was bought above the current ask price (the minimum price the seller is willing to take for a security). With that information, it is fairly reasonable to assume that it is a bullish call spread play.
It is impossible to tell exactly what the idea behind the play it is because we can't read the buyer's mind or see what other positions he/she has made. But looking through the rest of the flow today, we can see that there is an unusual amount of calls for mid November and December. Looking at the flow in the past few days, we can also see a heavy amount of calls for the same time frame. This helps to confirm our bias for this flow, and we can start to think about adding this stock to our watchlist.

This is a short overview for the first thing I look at when looking at opening a position. The next step is to figure out where the big money is in that stock. After, I look at upcoming events that could affect my position and how volatile the stock looks to be in the short term future. Does that help?

Edit: 10/24/2019 12:18 PM PST Correction edits to further clarify the FIS play and correct the first play from at the ask to below the bid.
 
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B

bausan

New member
The free scans or even the trading groups that have flow for $20-$60 a month usually only have PUT/SCAN attached to the flow, that's correct. While that does show one side of the trade, it doesn't show the full move. I prefer to see the actual trade on the trade tape so I can see more information.

For example, the FIS play today. At 10:27 am PST there was a 8,800 QTY FIS NOV 15, 2019 130 CALL @2.25 LMT order. But looking further at that particular play on a trade tape, you can see two things. First, that play is at the ask price, usually meaning it was sold. Selling a load of calls looks like a downside or taking profit play. But second, we can also see that it was part of a call spread. We think that because of the second entry at the same time, 8,800 QTY FIS NOV 15, 2019 125 CALL @ 4.85 LMT order. That play was bought above the market spread, usually meaning a buy because it was bought above the current bid price. With that information, it is fairly reasonable to assume that it is a bullish call spread play.
It is impossible to tell exactly what the idea behind the play it is because we can't read the buyer's mind or see what other positions he/she has made. But looking through the rest of the flow today, we can see that there is an unusual amount of calls for mid November and December. Looking at the flow in the past few days, we can also see a heavy amount of calls for the same time frame. This helps to confirm our bias for this flow, and we can start to think about adding this stock to our watchlist.

This is a short overview for the first thing I look at when looking at opening a position. The next step is to figure out where the big money is in that stock. After, I look at upcoming events that could affect my position and how volatile the stock looks to be in the short term future. Does that help?
Thank you SO much for your time to write this up.
I can't say that I understand 100% what you're saying, but i will need to verify my understand with practice.
I'm sure I will have more question.
Thanks again for your knowledge and contribution
 
M

MasterSteve

Active member
VIP
Thank you SO much for your time to write this up.
I can't say that I understand 100% what you're saying, but i will need to verify my understand with practice.
I'm sure I will have more question.
Thanks again for your knowledge and contribution
You're welcome! Hit me up anytime
 
S

skynetgen

Active member
Warehouse
The free scans or even the trading groups that have flow for $20-$60 a month usually only have PUT/SCAN attached to the flow, that's correct. While that does show one side of the trade, it doesn't show the full move. I prefer to see the actual trade on the trade tape so I can see more information.

For example, the FIS play today.
Nice find. A pretty good daily/weekly and monthly chart. seems that flow is great to at least point to interesting setups

Also must add that your options script is pretty amazing -thank you for sharing. It does produce great results when back testing as well (by setting custom timeframe for analyzing near inflection point)
 
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icantrade

New member
@MasterSteve first off, thank you so much for all this valuable share.
I have a few questions and would appreciate if you could help me a bit here:
a trade above ask what does that mean
a trade at ask - sold at ask as we saw in FIS short side calls earlier...
a trade below bid is a rush to close the trade ( you mentioned earlier);
otm puts on offer &
otm calls on offer - how do i interpret this;
positive net delta and negative net delta with neg and positive premium ( how do you interpret this and do you care about this ?)

TIA.
 
R

RDMercer

Member
You're welcome! Hit me up anytime
Just FYI - Thanks for your effort and I wanna take a look at the “flow” script posted earlier. You are definitely not the first to attempt this. As you know TDA / TOS does not buy/provide the data points that the Najarians / others use for UOA so it has to be calc’d in some way. To get at individual contract stuff in TOS you have to compare today’s volume for ALL contracts v yesterday’s while today’s trading volume isn’t known until tomorrow cause the book is not closed until after a day’s trading. By tomorrow the advantage of UOA may well be gone. Contracts are not marked to market when the exchanges are open. No doubt why the writer noted setting dates correctly in the script mentioned. A script to accurately ferret out UOA was “too complex” when I went down this rabbit hole 5 years ago. (Pete Hahn, TOS tech folks, other scripters). The results were incorrect and the script was “too complex” because TOS would have to process two days of contract info for every contract. IF TOS will now handle it as a scan I’m all in! What you’re doing with your eyes and buying UOA info from a 3rd party source is as close as anyone I know could get. Will try the script later. Good luck with this effort and it has promise; I hope you come up with a solution. Thanks Again!!
 
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M

MasterSteve

Active member
VIP
@MasterSteve first off, thank you so much for all this valuable share.
I have a few questions and would appreciate if you could help me a bit here:
a trade above ask what does that mean
a trade at ask - sold at ask as we saw in FIS short side calls earlier...
a trade below bid is a rush to close the trade ( you mentioned earlier);
otm puts on offer &
otm calls on offer - how do i interpret this;
positive net delta and negative net delta with neg and positive premium ( how do you interpret this and do you care about this ?)

TIA.
A trade at or above the ask usually means someone is buying a security. They're paying at or more than the minimum price that a seller is willing to take.
A trade at or below the bid usually means someone is selling a security. They're getting at or less than the minimum price that a buyer is willing to take. Both of these sides indicate that the trader we see is meeting the opposite party at their price, and pays a little more or gains a little less depending on what side its on.
Looking at otm puts or calls on offer really depends on how much, at what price, and depends wildly on the conditions of the play. It could be a hedge, could be an actual play. Hard to say without an example.
I keep an eye on the delta when I'm entering a position but I don't think that it usually affects whether I take it or not, just whether I may extend the trade out a few weeks. All of the trades I've entered in with this strategy have been purposely further out than they absolutely need to be, to preserve capital in case I get the play wrong. This is essential for risk management, you won't be right all the time and you don't want to blow through your account when you aren't.
This investopedia article explains basic delta function pretty well, but if you have more questions feel free to ask them.
 
C

codydog

Member
You can export lots of options data to excel from tos and then manipulate it as much as you want. You won't be able to scan every optionable stock, but if you focus on a few names, you'll see where the volume/OI, etc is anchored. Then just copy/paste whatever columns/rows you want to compare visually or with simply math. Most volume/OI is centered in nearby periods so its not alot ofwork.
 
MBF

MBF

Active member
2019 Donor
Warehouse
I meant bullish move just for FIS. That's pretty far OTM, maybe for a hedge?
Hey @MasterSteve, I haven't gotten much into flow. I watch option time and sales here there on TOS while trading but honestly it really doesn't tell me much except that I can see when the bulls and bears are fighting for the stock. I did try out Blackbox a few times but I didn't really have much time with it, full time job at the time, and you really need to know what you're doing with info like that. Which, I do not. Unless you like to follow people. Which I do not. I am thinking at this moment, like I said before, that day trading needs to be simple(r). If I have too much on my chart or watching too many things I tend to shut down. I do plan on swinging eventually so these things are great for me to study on the side.
Sig! I know him. He's such a good guy, really smart, former engineer. I have learned a lot from him, still do.
Thank you for the info above and the links. Glad you're feeling better.
 
C

cherif

Member
@MasterSteve , first of all thank you for the link regarding the put call ratio. i m look at it tonite and see how it can fit into day trading and swing trading. the reason why i am interested in the correlation between the price movement and the put call ratio is i am trying to see if in fact the money makers and institutions are using it as a contrarian data. example: if the p/c ratio goes beyond 1.5 which means traders are piling up puts, that triggers money movers to buy the stock heavily to make price go up and then push puts holders to sell their puts and cut their losses. same things can be said about the call side.
as far as the put/call ratio TOS links are concerned, the first one looks at multiple expiration. if so, if i put the expiration date as 20191116, would it mean that the code is looking at all the weekly expiration from now until Friday 20191115?
and based on your experience how should use this indicator to enter a trade ? thx again
 
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B

bausan

New member
A trade at or above the ask usually means someone is buying a security. They're paying at or more than the minimum price that a seller is willing to take.
A trade at or below the bid usually means someone is selling a security. They're getting at or less than the minimum price that a buyer is willing to take. Both of these sides indicate that the trader we see is meeting the opposite party at their price, and pays a little more or gains a little less depending on what side its on.
Looking at otm puts or calls on offer really depends on how much, at what price, and depends wildly on the conditions of the play. It could be a hedge, could be an actual play. Hard to say without an example.
I keep an eye on the delta when I'm entering a position but I don't think that it usually affects whether I take it or not, just whether I may extend the trade out a few weeks. All of the trades I've entered in with this strategy have been purposely further out than they absolutely need to be, to preserve capital in case I get the play wrong. This is essential for risk management, you won't be right all the time and you don't want to blow through your account when you aren't.
This investopedia article explains basic delta function pretty well, but if you have more questions feel free to ask them.
This cleared up a lot confusion for me
A trade at or above the ask usually means someone is buying a security.
A trade at or below the bid usually means someone is selling a security.
I'm using ToS Option Time and Sales and not very helpful, created more doubt, and ended up not trading at all.
I'm toying with the results from this free site.

 
S

skynetgen

Active member
Warehouse
This cleared up a lot confusion for me
A trade at or above the ask usually means someone is buying a security.
A trade at or below the bid usually means someone is selling a security.
I'm using ToS Option Time and Sales and not very helpful, created more doubt, and ended up not trading at all.
I'm toying with the results from this free site.

I am trying to incorporate flow into my setup analysis . been backtesting using the script MasterSteve provided it shows a lot of great confirmations
(for example AMD 10/8, AMRN 10/10, RTN 10/23)
 
B

bausan

New member
I am trying to incorporate flow into my setup analysis . been backtesting using the script MasterSteve provided it shows a lot of great confirmations
(for example AMD 10/8, AMRN 10/10, RTN 10/23)
are you talking about PUT CALL script above? If not, can you link to it?
 
B

bausan

New member
And for @MBF. I found a trader with this script in a discord group I recently joined and was able to get him to explain it to me. This is from Signet from the Pro Option Education Discord group.

"
PUT / CALL Graph This study is a bit tricky to use and the settings are gonna seem a little complex at first, but once you get comfortable with it you will come to love it.

I like to set it on a 1 minute chart with other indicators like Cumulative TICK. To set the date, the format is YEAR | Month | Day & the day is always the NEXT DAY after the date you see.

Example, if I want to set this on Facebook, I know that Friday is the last trading day for the options. I would need to set the date one day later for Saturday. This study is looking back @ a lot of options series & finds the aggregate.

PUT / CALL Graph
+ ( http://tos.mx/7Tck6mY )

PUT / CALL Graph (Single Series) This is the same study, but only looks for a single expiry. + ( http://tos.mx/voWo7Hb )

ThinkScript study_20191020

ThinkScript study_20191020

Tip: watch how you set the date

Year, month, day.

Options are only gonna be intraday while market is open
"

I've spent some time messing around with the graphs tonight on OnDemand thinkorswim and can answer some basic questions if you have any with it. It takes a little bit to load after you put it in and you can mess with some of the settings to look at exactly what you're interested in. Hope this helps.

Steve
@MasterSteve
Thanks again for your contribution and your patience

I didn't read instruction correctly and couldn't get it to work. I got it to show Put/Call now... (make sure you add extra day)
  • Does this only work with 1m? I set same date for 1m and D charts, and results are different.
  • I'm ASSUMING the label PUT/CALL are simply DIRECTION, PUT = expect down move, CALL = expect up move. Since it's not showing bid or ask. Is this right?
 
M

MasterSteve

Active member
VIP
Just FYI - Thanks for your effort and I wanna take a look at the “flow” script posted earlier. You are definitely not the first to attempt this. As you know TDA / TOS does not buy/provide the data points that the Najarians / others use for UOA so it has to be calc’d in some way. To get at individual contract stuff in TOS you have to compare today’s volume for ALL contracts v yesterday’s while today’s trading volume isn’t known until tomorrow cause the book is not closed until after a day’s trading. By tomorrow the advantage of UOA may well be gone. Contracts are not marked to market when the exchanges are open. No doubt why the writer noted setting dates correctly in the script mentioned. A script to accurately ferret out UOA was “too complex” when I went down this rabbit hole 5 years ago. (Pete Hahn, TOS tech folks, other scripters. The results were incorrect and the script was “too complex” because TOS would have to process two days of contract info for every contract. IF TOS will now handle it as a scan I’m all in! What you’re doing with your eyes and buying UOA info from a 3rd party source is as close as anyone I know could get. Will try the script later. Good luck with this effort and it has promise; I hope you come up with a solution. Thanks Again!!
I'd like to clarify I don't use this script to call out any of my flows and I don't have much experience with it. I just saw that some were interested in it and I found it, not sure how valid or accurate it is. That being said, I spent some time working with it and it looks like it could help with scalp trading. I agree with just one day's data the advantage of UOA could disappear. Let me know what you find with it!
 

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