Building an Options Unusual Volume Scanner
An unusual options volume scanner systematically flags options activity that deviates significantly from normal patterns. What it surfaces can be institutional positioning, pre-event speculation, informed trading, or hedging, and the scanner alone does not say which.
Core Scanner Logic
The fundamental concept is simple: compare current activity to baseline activity and flag significant deviations. The implementation requires several components:
Baseline Calculation: Establish a rolling average of daily options volume for each ticker. A 20-day average works well for most purposes, long enough to smooth out noise but short enough to reflect recent changes in a stock's activity profile. Some scanners use separate baselines for calls and puts, which improves detection of directional anomalies.
Threshold Setting: Define what constitutes "unusual." One threshold is 2x the average daily volume: a stock that normally trades 1,000 options per day triggering at 2,000+ contracts would appear on the scanner. Higher thresholds (3x, 5x) produce fewer alerts.
Strike-Level Analysis: Total ticker volume can miss concentrated activity at specific strikes. A scanner should also flag individual strikes where volume dramatically exceeds open interest (the volume/OI ratio), indicating new positions are being established at that specific price level.
Essential Filter Criteria
Raw unusual volume produces too many alerts. Effective scanners apply filters to improve signal quality:
Minimum Premium: Filter out penny options that can generate high volume ratios on tiny dollar amounts. Require a minimum premium of $0.25 or $0.50 per contract, or a minimum total dollar premium (e.g., $50,000+) to ensure the activity represents meaningful capital commitment.
Liquidity Minimum: Stocks with very low baseline volume can produce false signals from small absolute increases. Require a minimum baseline (e.g., average daily volume of at least 500 contracts) to ensure the underlying is liquid enough to trade.
Time Filtering: Options activity at the open can be noisy due to overnight order execution. Some scanners exclude the first 15-30 minutes. Similarly, activity in the final minutes can reflect hedging and rebalancing rather than directional views.
Earnings Exclusion (Optional): Stocks approaching earnings naturally see elevated options volume. Depending on your strategy, you may want to filter these out to focus on non-earnings-related unusual activity, or flag them separately.
Advanced Scanner Features
Directional Classification: Categorize each alert as bullish, bearish, or neutral based on whether the volume is concentrated in calls or puts and whether trades executed at the ask (buyer-initiated) or bid (seller-initiated). A stock with 5x usual call volume, all traded at the ask, reads as far more one-sided than one with mixed call and put volume at mixed prices.
Spread Detection: Identify when unusual volume appears in multiple strikes simultaneously, suggesting spread trades rather than outright directional bets. Common patterns include vertical spreads (adjacent strikes), calendars (same strike, different expirations), and risk reversals (OTM put and OTM call).
Repeat Alert Tracking: Flag when the same ticker appears on the unusual activity scanner on consecutive days. Single-day anomalies can be noise; multi-day unusual activity in the same direction is harder to dismiss that way.
Sector Aggregation: When multiple stocks in the same sector show unusual activity simultaneously, it suggests a sector-level thesis rather than individual stock catalysts. Group alerts by sector to identify these broader themes.
Using Scanner Output
Investigation, Not Action: Scanner alerts are starting points for research, not immediate trade signals. When a stock appears on your scanner, investigate: What is the catalyst? Is the flow opening or closing? Does the technical setup support the direction of the flow?
Position Sizing: Any information advantage in unusual volume decays quickly. By the time retail scanners detect the activity, some of it may already be reflected in price.
Success Tracking: Maintain a log of scanner alerts and their outcomes. Over time, identify which alert characteristics (size, type, sector, timing) have the highest success rates in your trading. This feedback loop allows you to refine your scanner parameters.
Available Tools
Building a custom scanner requires an options data feed and programming ability. For traders without technical resources, platforms like SquawkFlow provide pre-built unusual activity scanning. Our free options flow hub is open to anyone, with delayed snapshots of estimated premium and volume against open interest by ticker, expiry and call or put, and no direction claim.