Pete Najarian and Jon Najarian are familiar to most viewers of CNBC's Fast Money broadcast from New York City. Pete is the resident option expert on the show and sometimes appears on segments during the day. His older brother Jon is based in Chicago and sometimes appears on CNBC and does Fast Money shows from time to time.
They use a proprietary algorithm to analyze a quarter million quotes per second on all exchanges to follow the smart money -- institutional trades. They also understand the reason behind trades. Volume is not the only reason they jump on an option trade. Options could have big volume compared to their historical average and the lay person would not understand.
With options, they are looking if purchases of puts or calls are being placed at the offer (ask) which means people want to get in on the trade or on the bid, size of the purchases (is it big money trades or just regular John and Jane Doe purchases), they look at upcoming company events, and compare the information to historical trends and their guidelines as to whether it is an actionable trade.
You may be familiar with Optionmonster's Heat Seeker and Depth Charge. Heat Seeker is their program that identifies unusual call activitiy and depth charge identifies unusual put activity. It is important to note that their software is not for sale. I was surprised how many people have asked about buying the software. Their Optionmonster service interprets the information gained from their proprietary algorithms to provide recommendations.
An example of unusual activity would be the price of a put going up in price when the underlying stock is going up. The price of a put is supposed to go down when the underlying stock goes up.
They have four subscription products Inside Options, Option Trader Pro, Open Order and Advantage Point. Inside Options is for the experienced active trader and Option Trader Pro is for the less active experienced trader. Open Order is for rookie traders and Advantage Point is for stock trading. With Inside Options and Option Trader Pro there is a discount if you pay for a long term subscription as opposed to month to month. Update: they revamped the names of the products to: Inside Options Pro, Inside Options, and Open Order. From here on, all comments reference the old names and this review is for the premium service where you receive 3-5 option trade ideas per day..
I have used Option Trader Pro, Open Order, and Inside Options. For the most part, any trade recommendation found on Option Trader Pro will be on the Inside Options portion of the site. When I subscribed to Option Trader Pro, there were a few times when the recommendation came out before it hit Inside Options. I can only recall one time where the recommendation on Option Trader Pro never hit the Inside Options side. The alerts on their option picks or their citing unusual activity takes place during market hours.
You receive about 5 ideas a week with Option Trader Pro where you will get that many ideas per day with Inside Options. (continued)