Each trade in the flow feed has a variety of different data points. This blog post will be discussing the "SIDE" column.
There is a basic logic attached to the assignment of the 'Side' value for all trades:
A call or put transaction in which the spot price occurs at or closer to the reported NBBO ask price will be labeled a BUY (*).
A call or put transaction in which the spot price occurs at or closer to the reported NBBO bid price will be labeled a SELL.
The side of the trade will be NONE for trades that meeting any of the following conditions:
- all Cross trades
- all trades with the following Trade codes: LATE/OPEN/OPNL/OSEQ
NONE is a new side value that has been added in order to help distinguish flow data that may be misleading. Sometimes a trade can hit the tape late (code LATE), or out of sequence (OSEQ). These trades have been filled PRIOR to their hitting the tape, but the NBBO bid-ask of the trade in the flow feed will be the current values. Given this we cannot identify the possible sentiment these trades carry.
It is important to understand that the bid-ask spread of a contract can change very rapidly. A contract occurring at the ask-price does not necessarily mean that the contract was purchased: a trader could theoretically receive the full ask-price for a contract they have sold.
(*) Transactions occurring directly at the MID will be labeled as a BUY.
Now that we've established how the feed assigns each trade a SIDE, let's talk about how the SIDE affects the sentiment of the trade.
The Bullish, Bearish, and Neutral emojis in the flow feed are attached to all trades based on the 'Side' logic discussed above.
A Call transacting on the BUY side (at or closer to the ask price) will be labeled Bullish.
A Call transacting on the SELL side (at or closer to the bid price) will be labeled Bearish.
A Put transaction on the BUY side (at or closer to the ask price) will be labeled Bearish.
A Put transaction on the SELL side (at or closer to the bid price) will be labeled Bullish.
All trades with the Side of NONE will be labeled as Neutral.
Keep in mind that options contracts can be OPENED or CLOSED. An individual may buy (to close) a call contract, which would carry a much different sentiment than an individual buying (to open) a call contract.