Investing is a game of observation, trends, and speculation. To find out the most profitable avenue, you need to look for the hot trends in the market. How to engage in this? It’s simple; you would sit in a restaurant to find the latest food trends; similarly, you should stick to the options crowd to find stock trends. It does not connect to if your portfolio has calls or puts, but observing options is essential to discover the best trading options.
You can follow this from any space through the Sizzle Index. It is a tool on Thinkorswim, which is a trading platform. So all you need to do is open this tool and start trading through the power of observation.
What is Sizzle Index?
Sizzle index represents the ratio of security’s current options volume over that security’s average options volume. For example, if some stock has Sizzle index 4, the current daily options volume is four times that of its average. Sizzle index scans trading assets to find the unusual volume.
What is a good sizzle index?
A good sizzle index that detects unusual market behavior has a high value. The sizzle index is trying to identify specific options contracts trading an increased volume relative to the contract’s average daily volume. High sizzle index such as 5 or 10 shows that a big move can happen shortly.
What is the sizzle index in Thinkorswim?
The sizzle index in Thinkorswim represents the ratio of security’s current options volume over that security’s average options volume. Sizzle index detects unusual activity in assets volume. You can refine in Thinkorswin platform and save the sizzle index easily.
Options volume can help you in finding out about stocks when the prices fall or rise. For example, a sizzling high value of the options coincides with the hefty up or down price; this may insinuate that the change has occurred to provide strength. If that is happening then, an increasing % price increase combined with thin trading volume can hardly be an indicator of the staying power. In contrast, this is an indication that reversal is happening.
While you monitor tracking options volume, you need to distinguish if the traders are indulging in purchasing or selling the call options or put options. It would help if you also observed unusual options volume because that indicates where your invested stock is headed.
What is the best way to do this volume temperature study without dipping your toes in the sand? Use the Sizzle Index tool by Thinkorswim. It helps in screening stocks that are coming up with unusual options volume compared to the draw recently.
The know-how of the Sizzle Index
If you are a stickler of strategies and believe in trying your luck only when the inner details of an indicator are revealed, this might be your best pick! The sizzle index indicates the ratio between security’s current options volume and security’s average options volume, respectively. So, for example, if you come around stock with a sizzle index standing at 4.00, that is an indication of an increase in volume by four times compared to the daily average options value.
This can also be termed as the unusual options activity monitor or scanner. It helps to be behind the money invested in stock while also finding out about favorable trading options. You cannot keep an eye on every stock at all times. Hence, using the Sizzle Index feature of “quick scan” does the hefty work for you and helps in pointing out the unusually high volume. You can also utilize it as a tool for quick scanning of unusual suspects that interest you.
How to scan for option sizzle index in Thinkorswim?
When you go to the thinkorswim platform, choose Scan and go to the Stock Hacker tab; look at the flame at the top right and select it; it is the indicator of the Sizzle index. This action will autofill the Stock Hacker with arguments to look for securities with a pe-share price that is more than $5, volume is more than 100,000 shares, and the market cap stands at $35MM with unusual options value. You can alter these values by using the text entry boxes or sliders. You did select Scan.
Combine your observation with other considerations
When you press Scan, it will present you with the top 10 sizzling securities, this is done by measuring the options volume with the performance of the previous 5 days and how it varies. You can also find more information through the put and call sizzle columns. To do that, select Customize to do that gear-like option on the top right of the scan results.
Make use of the scroll menu or the search box to find the Put Sizzle Index or the Call Sizzle Index and add it to the set by selecting the option (Add Items). Press OK and the new column options will appear in the search result. It will break the unusual options volume in the symbols by trades in calls or puts of the concerned. You can also use the Options Statistics in the Trade Tab for in-depth information.
Refine that Sizzle
By using the Stock Hacker under the Scan tab to refind the list of your observations. For instance, you only desire to bite stocks that value around $20 per share. Select from Add Fundamental Filter and choose Last under Criteria. Then, under Max, select $20 and select the Scan button. You can also modify the volume of stocks by using the Show option.
Save the Sizzle
You have 2 options: to create a dynamic or static watchlist. A dynamic watchlist will reverse and run the Scan against current market activity and update the list with new securities within your criteria. Then, you can save the list or set a reminder for it. On the other hand, a static watchlist will take a pic of securities that fit your criteria in the present time and save it. Go to the right part of the screen, look for the Search Results ribbon,n, and choose Save As Watchlist for a static watchlist.
Final Thoughts
It is not mandatory to scan to see Sizzle. You can also add it to the Sizzle Index as a column to any of your watchlists to find out about the correct level of speculation for a security’s options. It is also visible in the Today’s Options Statistics in All Products option. They provide calls and put Sizzle Indices if you want to scan only one side of the trading chain.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
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