You don’t need to follow charts tick-by-tick. Options data reveals who’s really in control, when they’re acting, and where the market is likely to go. This quick guide walks you through the key concepts; starting simple, building up. Before diving in, make sure you’ve completed the free courses and understand the basics of short-term options trading. You can also watch support videos to learn how our tools take advantage of the concepts below.
LEVEL 1: FOUNDATIONS OF OPTIONS SIGNALS
1. Flow – Understanding Bullish vs. Bearish Behavior
- Calls bought → Bullish
- Puts bought → Bearish
- Calls sold → No longer bullish (does not always mean bearish)
- Puts sold → No longer bearish (does not always mean bullish)
Flow is sentiment; raw intention. But it’s just the surface.
2. Volume – Attention and Intention
- Volume spikes at specific strikes are what matter.
LEVEL 2: MECHANICS OF PRICE MOVEMENT
3. Delta – Dealer Directional Pressure
- Measures how much stock dealers need to buy or sell to stay hedged.
- More delta → more hedging → more price influence.
Delta tells you the direction price moves.
6. Gamma – Stability vs. Chaos
- Positive Gamma → Dealers fight price → Stability.
- Negative Gamma → Dealers chase price → Volatility.
Gamma explains market tone: either choppy to slow rise or runaway (squeeze or intense sell off)
7. Charm – Time-Based Delta Changes
- As time passes, delta fades.
- This forces dealers to adjust often causing rallies or fades intraday.
Time alone can cause big moves. This is “Charm.”
8. Theta – Decay and Acceleration
- Options lose value over time and fastest near expiration.
- That decay accelerates market moves as hedges are unwound.
This is why the 0DTE is the star of the show.
LEVEL 3: MAPS & MAGNETS – STRIKES THAT MATTER
9. If Market participants are
- Long OTM Puts → That level from the dealer’s perspective becomes support when we get there (buy zones)
- Long OTM Calls → That level from the dealer’s perspective becomes resistance when we get there (sell zones)
- Long ITM Calls → That level from the dealer’s perspective becomes support when we get there (buy zones)
- Long ITM Puts → That level from the dealer’s perspective becomes resistance when we get there (sell zones)
10. If Market participants are short Options, we get the Pin & Magnet Effects
- Short OTM options → Price gets pulled toward them.
- Short ITM options → Pinning; price slows or holds.
These are active zones; price gets sucked in.
LEVEL 4: TIMING & VELOCITY – KNOW WHEN TO ACT
11. Spikes – Real-Time Trade Triggers
- Flow or volume spikes show where whales act.
- These are your best real-time entries/exits.
Spikes = urgency. Don’t ignore.
12. Vanna – The Volatility Hedge Loop
- Drop in IV → Dealers buy back delta → Price rallies.
- Vanna plays are powerful post-event (CPI, earnings, FOMC etc…).
IV crush isn’t just about options, it moves the whole market.
13. Multiple Expirations. Know the Calendar
- Different expiries impact gamma, flow, hedging.
- 0DTE → short-term spikes
- Weeklies/monthlies → bigger positioning swings but their flow may not matter today.
Not all expiries are equal. Plan around the ones that matter.
Final Takeaway
Start with understanding flow and delta. Then add gamma and charm to understand why markets whip or stall. Use long/short strike positioning to map where price is likely to reverse or pin.
