Options volume

Options volume is the number of options contracts traded during a session. It can be measured for a single contract (one strike and expiration), for all calls or all puts, or for every option on a stock combined. Each trade counts once, regardless of whether it opened or closed a position.

How it works

Volume resets to zero at the start of each trading day and accumulates in real time. On its own, a volume number says little, so traders compare it with two baselines:

• The stock's average daily options volume. A day at five or ten times normal stands out, much like relative volume in shares.
• Open interest. Volume well above existing open interest in a strike means traders are likely opening new positions there.

Volume is often split into calls versus puts, which feeds the put/call ratio, and sometimes by whether trades executed near the bid or the ask, as a rough read on who initiated them.

Why it matters for traders

Spikes in options volume often show up before or alongside news: an earnings date, an FDA decision, takeover rumors or a breaking headline. Heavy volume concentrated in short-dated, out-of-the-money contracts is a common definition of unusual options activity.

The trap is reading direction into volume. A large call trade could be a bullish bet, a covered call seller, a hedge against a short stock position, or one leg of a spread.

Example

Northwind Therapeutics (NWTX) averages about 2,000 options contracts a day. One afternoon, 18,000 contracts trade, nine times normal, and 14,000 of them are calls at the $15 strike expiring in three weeks, with the stock at $11. Open interest at that strike was 600 the prior day. That combination of volume, strike and timing is what traders would flag and then check against news and the next day's open interest.

FAQ

Is high options volume bullish?

Not by itself. You need to know whether the volume is in calls or puts, whether trades were bought or sold, and whether they opened new positions.

Where does options volume data come from?

US listed options trade on multiple exchanges and are cleared by the Options Clearing Corporation. Trade data is consolidated and published in real time by market data providers.