Beyond Market Sentiment: What Can You Learn from the Top Options List?

Options move fast, and the Top Options List gives a quick overview of what happens in the market for a specific ticker.

Are you one of those investors who always checks the market news in the morning, trying to size up the collective mood of the majority?

Market sentiment about how bullish and bearish the market is can help investors make logical decisions at emotional market turning points. The Top Options List provided by Webull can offer valuable clues toward a particular stock, sector, or overall market by analyzing the behavior of options traders.

Check the Popularity

Maybe you have noticed that investing is a bit of a popularity contest. Just as fashions come and go, investors tend to favor certain stocks.

When it comes to options trading, you will see that some tickers almost always dominate the Top Volume List and Top Position List. But sometimes, a newcomer might catch your eye.

Here we introduce two important datasets in options trading:

  • Daily volume is the number of contracts traded on a particular day.
  • Open interest, also called open positions, refers to the number of option contracts that are still open and not yet closed. It gives crucial information about whether there is an active secondary market.

Some tickers have incredibly active options with daily volume and open interest of over one million contracts. Others may barely trade, even if they're well-known companies.

Focusing on volume and open interest helps identify trading opportunities you might otherwise overlook. After all, symbols with more transactions are more liquid. They tend to have tighter bid/ask spreads, lowering transaction costs. Moreover, higher liquidity can also make it easier when applying complex strategies like calendar spread with multiple legs. The Top Options List provided by Webull also ranks each specific option contract according to its daily volume and open interest from high to low. Don't forget to check it!

Meanwhile, another critical indicator is on the right of the total volume and position column, which is especially valuable for options investors.

Understanding Put/Call Ratio

A put option gives the buyer the right to sell a specified amount of the underlying security at a specified price and by a specified date. A call is the right to buy the underlying security. The Put/Call ratio math is simple: puts are divided by calls.

More specifically, the Put/Call ratio is estimated as follows on a given day for both the measures of trading activity such as trading volume and open interest.

Let's say the OCC reported 3.43 million puts on a specific day and 2.11 million calls traded, meaning the P/C volume ratio was 1.62 (or 3.43/2.11).

The put/call ratio can indicate investor sentiment for a stock, index, or the entire stock market. According to some investors, if the P/C ratio is below a specific level, it would signal a high level of bullish sentiment. Conversely, a put-call ratio above a particular level can indicate a bearish outlook. However, it can also work the opposite from a contrarian viewpoint. Suppose the market is going up with a very low P/C ratio. For contrarians, it could be a signal that the market might be getting overbought and headed for a move the other way.

P/C ratios may be helpful and can be applied to different markets. Remember, no indicator is a master key card. It's essential to consider other factors, including fundamentals like earnings and economic data. It is best used as an indicator, not as a stand-alone tool or ticket to riches.

Checking Unusual Activities

Unusual activities can provide clues on the movement of "the smart money," which commonly refers to capital that institutional investors are controlling. Large volume orders, or significant new positions established or closed, may indicate a potentially big move in the underlying asset. By understanding how others invest their capital with unusual activities, we can "stand on the shoulders of giants" and make a more informed investment decision.

You may check the unusual activity by following these tabs:

  • Position Increased List: ranks individual option contracts with the largest increased open interest from the last trading day. A sharp increase in open interest may indicate new money coming in, with a continuation of the present trend (up, down or neutral).

  • Position Decreased List: ranks individual option contracts with the largest decreased open interest from the last trading day. Conversely, a sharp decrease indicates that the market is liquidating, possibly as the price trend ends.

  • Implied Volatility List: ranks each option contract from the highest implied volatility. Elevated implied volatility indicates that investors anticipate the underlying security to experience higher than average price swings. This may be due to an upcoming or impending event, such as an earnings announcement or SEC filing.

Next Step: Get Started!

For the OPRA subscribers, you have the real-time quote info of the Top Options Lists. Non-subscribers will have a 15-minute delay.

There are usually two ways to access it:

1. You can click here for our latest mobile version.

2. Or, you can scroll down on the market page and find it yourself, as shown below.

Disclaimer: Options trading entails significant risk and is not appropriate for all investors. Option investors can rapidly lose the value of their investment in a short period of time and incur permanent loss by expiration date. Losses can potentially exceed the initial required deposit. Before trading options please read the Options Disclosure Document "Characteristics and Risks of Standardized Options" which can be obtained at Index Option contract fee, Regulatory and Exchange Fees may apply.
Lesson List
What is an option?
What to Know Before Trading Options?
Three Ways to Use Options in Your Portfolio
Overcoming the Misconceptions About Options
What is an index option?
What is an ETF option?
What are Option Greeks?
Available Strategies for Level 1 and Level 2
Beyond Market Sentiment: What Can You Learn from the Top Options List?