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The sizzle index

Options Trading

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One of the most important "hidden"

indicators

This is one of the most important "hidden" indicators in the options market, although it is unknown to 99% of stock traders.

There is a cliché in the market: "Follow the smart money".

Smart money refers to, for example, the investment funds that trade in large quantities. In many cases, it is totally hopeless to predict the movement of a paper on the basis of chart  formations.

However, those who play with large amounts - ie. smart money - do not trade the movement of the paper only with the underlying product, but with options as well.

But how do you know to which options of which paper the money flows into?

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What is sizzle index?

"The sizzle index is the current volume of all options for the underlying product divided by the average of the total volume of options in the past 5 trading days .."

In other words, if the value of the sizzle index is bigger than one, the total option volume on the underlying product today is higher than the average of the last 5 days. What does it indicate, when the value of a certain sizzle index is 100 or higher? I leave that to the power of your imagination :)

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But what is the good in all this?

It is easy to see that a very high sizzle index number means that there is an enormous interest for certain options of a particular paper.

This can happen even if the underlying product has not changed. That means the market, the smart money, started to price something. What it prices is - of course - subjective.

The sizzle index is one of the most professional "hidden" options indices!

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Feel free to ask me!

Email: gery@optionsrules.comMy webpage: http://www.optionsrules.com/

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