If you’ve been following along at New Money Crew, then you know I love trading institutional order flow…
No doubt, you’ll also know traders need to be selective on what type of order flow we’re looking for before taking a trade.
Of course, the size of the bet and the underlying stock are two of the biggest factors when making these decisions…
But all of that can be spoiled if the order flow hitting the option isn’t “clean” — meaning the trade we’re seeing isn’t tied to a position already held in the buyer’s book.
We want to see traders initiate new positions because it tells us if the buyer believes the stock will rise (if it’s a call) or fall (if it’s a put).
And although we can’t call them up and find out for certain what they’re up to, there are a few red flags we can look for that tell us if the options order flow is “clean.”
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