Lesson 1 of 8 · 2 min
Options basics
Calls, puts, strikes and expiries — and what traders mean by "flow".
Definition
An option gives its buyer the right, but not the obligation, to buy (call) or sell (put) an underlying at a set price (the strike) by a set date (the expiration). The buyer pays a premium; the seller receives it and takes on the obligation.
Options flow refers to the trades happening in options — which strikes, expiries, sizes and sides — and what they might imply about positioning.
Index options and futures
For ES and NQ traders, the relevant options include SPX and NDX index options, the SPY and QQQ ETF options, and options on the futures themselves. They're linked to the futures by hedging and arbitrage.
Key Insight
A big options trade doesn't reveal intent on its own. It could be a new bet, a hedge, the closing of an old position, or one leg of a spread.
Trading implication
Learn the vocabulary first. Interpreting flow without knowing what a trade could represent leads to confident, wrong conclusions.
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