Beginner’s Guide to Reading Options Flow — Especially in Volatile Markets

Understand what matters, what to ignore, and what all these confusing terms actually mean in options flow.

First Things First: What Is Options Flow?

Options flow is the record of big trades being made in the options market — it’s like watching what the smart (or big) money is doing. These trades show when someone buys or sells a lot of options contracts at once.

Now, what’s an option?

🔹 An option is a contract that gives you the right (but not the obligation) to buy or sell a stock at a specific price (called the strike price) before a certain expiration date.

There are two types of options:

Call option = You expect the stock price to go up
Put option = You expect the stock price to go down

Each options contract controls 100 shares of the stock. So when someone trades 10,000 contracts, it’s a very large trade — they’re betting on 1 million shares.

Example 1: Confusing Flow – PDD $129 Calls

Stock: PDD Holdings ($PDD)
Option: $129 call (means they expect PDD to go above $129)
Expiration: April 4
Trade size: 10,000 contracts
Price paid per contract (premium): $0.70
Total money spent: $700,000
Fill type: Ask-side fill (they paid the full asking price)
Bid/Ask spread: $0.00 (bid) / $0.70 (ask)

💡 Bid = highest price a buyer will pay
💡 Ask = lowest price a seller will accept

Why this is confusing: The bid was $0.00, meaning no one was trying to buy this contract at all — that’s a red flag. The trader jumped in and paid the full ask price, but with no real buyers lined up, it’s hard to know why they did it.

Was it a hedge?
Were they already short the stock?
Was it even a bullish bet?

Key takeaway: If a trade doesn’t make sense, don’t force it. Just move on.

Example 2: Mixed Signals – DAR $40 Call Spread

Stock: Darling Ingredients ($DAR)
Trade: 10,000 contracts of $40 calls (buying the right to buy at $40)
Fill: At $1.37 (near the ask side)
But… it’s a multi-leg trade (more than one option was involved)

When we look deeper, we see the trade was paired with:

$35 calls (5,000 contracts)
Both trades were ask-side fills, meaning they were both likely being bought

💡 Normally in a spread, you buy one option and sell another to limit risk or cost.

So why are both legs being bought?

This is where things get confusing again:

Could be a ratio spread (complex strategy)
Could be two different traders
But we can’t know for sure

Key takeaway: If you can’t tell what someone’s doing, don’t guess — just skip it.

Example 3: Clean and Simple – TECK $39 Calls

Stock: Teck Resources ($TECK)
Option: $39 call
Expiration: May 16
Type: Single-leg trade (just one option)
Repeated activity at the ask price
Volume is high, and open interest suggests new positions

💡 Open interest = total number of existing contracts that haven’t been closed
If volume is higher than open interest, it likely means new trades

Also:

This option was traded earlier on April 2
Back then, the contract cost 3x more, but now it’s cheaper — likely a new entry

Key takeaway:

Clean flow
Single-leg trade
Repeated ask-side fills
Much more reliable signal than the last two

Example 4: Full Round-Trip – TSLA $200 Puts

Stock: Tesla ($TSLA)
Option: $200 puts (expecting stock to go down)
Expiration: April 25
March 30: Big bid-side action (means someone was selling puts, probably bullish)
But the same amount of contracts were traded at the ask on March 27 — likely buying puts