Key Takeaways

• Tracking options activity provides insights into market expectations for a specific stock.
• Discover how the Sizzle Index aids traders in finding, filtering, refining, and monitoring stocks with unusual options activity.
• Unusual options activity can suggest potential stock ideas.

The Significance of Options Volume

Options volume should be considered in conjunction with other indicators. When volume surges align with significant price movements, it may indicate strength in the direction of the change. Conversely, large percentage price increases accompanied by low trading volume are less likely to indicate a lasting market trend and may signify an upcoming reversal.

When monitoring options volume, it is essential to determine whether the crowd is buying or selling call options (which grants the right but not the obligation to buy the underlying stock at a predetermined price and time) or put options (which grants the right but not the obligation to sell). Additionally, identifying unusual option volume can provide insights into potential future movements of the underlying stock.

Introducing the Sizzle Index

To gauge volume activity without delving into the details, try using the Sizzle Index on the thinkorswim platform from TD Ameritrade. This indicator screens stocks based on their unusual options volume compared to their recent averages. The Sizzle Index is calculated by dividing a security’s current options volume by its average options volume. For example, a Sizzle Index of 5.00 indicates that a stock’s current daily options volume is five times higher than its daily average volume. Conversely, a Sizzle Index of 0.50 suggests that the current volume is only half of its average volume.

Consider the Sizzle Index an unconventional options activity scanner that helps you locate potential trading opportunities. Since it’s impossible to monitor all stocks constantly, the Sizzle Index’s “quick scan” feature does the heavy lifting by identifying unusually high values. It condenses a round-up of stocks with unusual options activity, allowing you to keep an eye on them.

Setting Up and Refining Your Sizzle

Using the Sizzle Index as an unusual options activity scanner is hassle-free. Here’s how you can get started:

1. Scan all optionable stocks: On the thinkorswim platform, navigate to the Scan tab and click on the flame icon representing the Sizzle Index. Next, click the Stock Hacker button. Since you want to search for stocks with options, choose the “All Optionable Stocks” category from the Scan-in button. This will enable you to scan all optionable securities with a per-share price above $5, volume above 100,000 shares, and a market cap above $35MM for the most unusual options volume.

2. Compare with other metrics: The results will display the top ten most “sizzling” securities. These rankings are determined by how many times their option volume exceeds the volume of the past five days, in descending order. You can further analyze call and put activity within the sizzling stocks by utilizing the put and call sizzle columns. To do this, go into the “Sorted by” tab and select “Optionable Underlying Metrics.” Choose either the “Put Sizzle Index” or “Call Sizzle Index” and click Scan again for a new list. For more detailed information, leverage the “Options Time and Sales” feature on the Trade tab.

3. Refine your sizzle: Use the ‘Stock Hacker’ tool under the Scan tab to refine your sizzle list further. For example, you may choose to only consider stocks trading under $20 per share. Click “Add Fundamental Filter” and select “Last” under “Criteria.” Set the maximum value to $20 and click the Scan button.

4. Expand your results: Increase the number of stocks displayed in your Sizzle Index by clicking the drop-down next to the “Show” button.

5. Save your sizzle: You have the option to save your sizzle as either a static or dynamic watchlist. A static watchlist captures a snapshot of the securities that currently meet your scan criteria. To create a static watchlist, go to the right side of the screen on the “Search Results” ribbon and click “Save As.” Provide a name for your watchlist. A dynamic watchlist, on the other hand, refreshes periodically and updates the list as new securities meet your criteria. Click it to save as a watchlist or set an alert for changes in the sizzle.

In addition to scanning, you can also add the Sizzle Index as a column to any watchlist on the thinkorswim platform. This provides a quick overview of options activity for a specific security. Alternatively, navigate to the “All Products” tab and locate “Today’s Options Statistics” to view the Sizzle Index while examining the options chain. These options allow you to monitor call- and put-specific Sizzle Indexes for a more focused analysis. Exploring these features ensures that you’re always informed about what’s happening in the market.

Conclusion

By leveraging the power of the Sizzle Index, you can uncover intriguing trading opportunities through its screening capabilities. Monitoring unusual options activity allows you to stay ahead of market expectations and potentially identify stocks to keep an eye on. Remember to employ this tool alongside other indicators for a well-rounded analysis of the market.