There are plenty of ways for retail investors to gauge how the market feels about a certain stock or group of stocks, and that is typically done through measuring buying or selling activity right along with price action relative to a benchmark like the S&P 500 index. However, there’s a much more significant way to align portfolios with what the so-called “smart money” might be thinking in the background.
This is where tracking unusual options activity comes in handy for investors. In the world of options, the stakes are driven much higher by two main factors. First, options inherently increase the leverage taken in any trade, so position swings are much more aggressive (and thus require more conviction). The second aspect is timing, since options have an expiration date that threatens the total loss of a position if mistimed.
