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Top 10 Stocks With Most Active Options
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All share trading is a gamble, but a wide spread is a risk many investors are not willing to take. The options must all have the same strike price and expiration to be considered part of the volume.
Trading volume in options and common stock around quarterly earnings announcements
If you buy a call option, you are betting that the price will increase, and if you sell a call option, you are betting the price will go down. The general strategy when you buy a call option is to watch the price of the shares and evaluate when the profits from selling the call would be greater than the cost of the call.
Keep in mind that when you buy the call option, you are only paying the option price up front.
Above that, you will be garnering profit. Given all of this, you are faced with the original question of whether a high call volume indicates good earnings. In essence, a high call volume indicates a great deal of interest in the shares and an expectation that the value will rise within the period of the expiration. This amount of interest can itself actually cause the value to rise. As such, high volume can indicate that the market expects an increase and jumping on the bandwagon can garner profits.
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This is not a clear bellwether. You must also consider the trending strike of the options. A high volume accompanied by high prices means traders with information think prices will go up. If that same volume is seen with dropping prices, it indicates informed traders are expecting a dive.
How an options-trading frenzy is lifting stocks and stirring fears of a market bubble - MarketWatch
However, you must also keep in mind the possibility of sweeping. Sweeps are large orders, which means both a large bankroll and a desire to remain under the radar.
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Both of these indicate the buyers are expecting a large move in the market as a whole in the near future.