Day 5: What's Next?

Remember, the Options Flow is just the beginning of the process - It's the signal that someone believes the stock is on the verge of making a large and unexpected move.

So, after you filter the Options Flow, you must bring in the other elements like Technical Analysis and Fundamentals.

To practice, Start with the options in your Options Watchlist. 

• What direction are they pointing to in the stock? 
• What does the Chart say?
• And then what event is someone looking at to make the stock move in that direction?

Here are the 3 elements to the process. The idea is that you want all 3 to point in the right direction.

1. OPTIONS
a. Find Opening Buyers  
Over the course of the last week, you've learned how to read and analyze the options flow in the pursuit of finding Opening Option Buyers. It does take practice, and if you have questions feel free to throw them into the Trade Idea Forum under "UOA Trades." 

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You spent the last 5 days honing your skills on finding a pool of trade ideas that are worth your time. Now, you have to filter those trades down with the everything I've outlined below. Some of it is mechanical. A lot of it is reading good articles, finding good videos, hunting for good logic, and connecting the dots.

b. Find a Target Stock Price
One thing exclusive to OptionsGeek is the ability to use the RR$ to better understand the Buyer's Target Stock Price. Read THIS ARTICLE to see how you can use the New Options Chain to back out what may be the most insightful message from the Options Flow.

c. Who owns it?
By looking at the holders of the stock, you can see who has traded options in the name. I developed a quick snapshot of the Top 5 Call and Put buyers in each stock. You can find that by click the black Shark Fin icon near the Stock Price Info. 

To get the full list of holders use www.holdingschannel.com.

d. Repeat buyers / more action?
Use the "My Watchlist" off the Group dropdown on the Home Page to keep on top of the names  names If you miss a day you can just change the date backwards and quickly see any large flow.

2. CHARTS

Everyone has a different way of doing technical analysis. The goal here is to try to get a sense of the directional sentiment indicated by the chart without being biased by what the options flow is saying. In other words, let the chart speak for itself. 

• What does the chart say?
• Where are the key support/resistance levels?

Then try to relate what the options flow is saying, for example:

• How does the RR$ relate to the chart? Can the stock get there?

3. FUNDAMENTALS ("The Story")

While fundamental analysis is geared toward more long-term investing, Options are usually a near-term product. That doesn't mean we don't care about fundamentals. But, more importantly, we want to understand two things:

1. How does the company make money?
2. (If considering the Bullish side) What is so exciting about the company right now?
   (If considering the Bearish side) What is so risky about the company right now?

You want to look for an event that might change an investor's perception on the stock. Here's a good start: 

• Look for an event
• Read a few articles. What’s exciting about the company?
• The #1 place to find the "Story" is in the earnings transcripts/presentation. Go listen to the CEO pitch the story to you and the biggest investors in the world. And one hint: Pay attention to the Q&A!

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