Building an Options Unusual Volume Scanner
How to build and use a scanner for unusual options activity.
Building an Options Unusual Volume Scanner
An unusual options volume scanner is one of the most powerful tools in a flow trader's arsenal. By systematically identifying options activity that deviates significantly from normal patterns, you can surface potential institutional positioning, pre-event speculation, and informed trading before it becomes widely known.
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." A common 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. More aggressive thresholds (3x, 5x) produce fewer alerts but higher quality signals.
**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, is a much stronger bullish signal 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, but multi-day unusual activity in the same direction significantly increases the probability of a meaningful thesis behind the flow.
**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:** Even after investigation, unusual volume trades should start small. The information advantage decays quickly—by the time retail scanners detect the activity, some of the edge 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 with intelligent filtering, highlighting the highest-conviction alerts in real time.
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." A common 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. More aggressive thresholds (3x, 5x) produce fewer alerts but higher quality signals.
**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, is a much stronger bullish signal 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, but multi-day unusual activity in the same direction significantly increases the probability of a meaningful thesis behind the flow.
**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:** Even after investigation, unusual volume trades should start small. The information advantage decays quickly—by the time retail scanners detect the activity, some of the edge 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 with intelligent filtering, highlighting the highest-conviction alerts in real time.
Track this live on SquawkFlow
Real-time options flow, GEX dashboard, dark pool alerts, and AI narration — free.
Open Terminal →