Today some institution/fund purchased 6,119 contracts of April $77.50 strike calls (or the right to purchase 611,900 shares of Gilead GILD at $77.50). This is a larger sized bet for this stock and contract as the open interest was just 1,157 prior to this purchase.
Monitoring unusual options activity can be a useful tool. Large amounts of options being traded on a particular stock may provide some valuable insight into what the “smart money” is doing.
Checking unusual options activity on a regular basis can draw attention to stocks that would have otherwise been missed and can prompt traders to analyze why options volume has spiked for a certain equity. For example, a large option order could be done for a number of different reasons, sometimes they can even look deceptive. For the most part, options can be used to hedge an existing position or for speculation. Our job is to look at the underlying security and figure out why – before taking any action.
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