Options Flow Analysis Trading

TMX Money provides free basic options data. IBKR has a built-in options scanner. Most US-focused flow services (FlowAlgo, Unusual Whales) have limited Canadian coverage. For serious flow trading, you may need to monitor MX data directly or use IBKR's tools.

The Big 5 banks (RY, TD, BMO, BNS, CM) have the most liquid options. Other liquid names: ENB, SU, CNQ (energy), SHOP (tech), CNR/CP (rails), ABX (gold). Stick to TSX 60 components for best liquidity.

$25,000+ CAD recommended. You need enough to properly size positions (1-2% risk) and handle the inherent volatility of following flow. Smaller accounts face excessive position concentration.

Yes, following publicly visible options flow is completely legal. You're observing market transactions that anyone can see. What's illegal is insider trading - trading on material non-public information. Flow analysis is legal market observation.

Win rates typically range from 40-55% for quality flow signals. The edge comes from asymmetric payoffs (larger winners than losers), not high win rate. Expect many false signals - this is why proper risk management is essential.

Hedging is more likely when: the underlying is widely held (index components, ETFs), the put flow is protective (slightly OTM, moderate size), and there's no catalyst. Directional is more likely when: strikes are aggressive (ATM or slightly OTM), execution is urgent (sweeps), and there's a near-term catalyst.

Not necessarily. The exact strike may have inflated premium after flow. Consider nearby strikes or slightly further expirations for better pricing. The key is directional exposure, not exact replication.

Fresh flow (within minutes to hours) is more valuable than stale flow (days old). However, don't chase - wait for reasonable entry price. If flow was yesterday, the information edge may already be priced in.

Conflicting flow may indicate volatility positioning (straddle/strangle) rather than directional bet. The trader may expect a big move but be unsure of direction. Consider trading volatility rather than direction, or stay out.

Honor your stops. If options are down 50%, exit. If the catalyst passed without the expected move, exit. If opposite flow appears (informed changing view), consider exiting. Don't average into losing flow trades.

Historical flow data is expensive and often incomplete. Services like OptionMetrics provide historical data. Simulate entries on historical flow signals and track outcomes. Be aware of survivorship bias - you only see flow that traded, not orders that were cancelled.

Sometimes informed money positions before earnings. Look for unusual flow 1-5 days before earnings, particularly in short-dated options. However, earnings are highly uncertain and flow can be wrong. Size positions conservatively for earnings plays.

Market makers create noise in flow data. Large trades at mid-market are often MM providing liquidity. Sweeps are less likely MM activity. Focus on aggressive fills at ask (for calls) or bid (for puts) to identify directional traders.

Use broker APIs (IBKR) or data providers for options data. Build scanners for: unusual volume, premium thresholds, sweep detection, volume/OI ratio. Alert for signals meeting criteria. Start with alerts for manual review before automating execution.

In high-vol: options are expensive, reduce position sizes. More flow is hedging during fear. Focus on call sweeps (bullish) which are more informative than put flow (likely hedging). Expect wider bid/ask spreads - be patient on entries.