- Should you follow the Money flowing into or out of Options?
- Would doing that give you a substantial advantage in the stock market?
These were two very good questions from a Free Member subscriber wanted to know if there was a link between the Stock Market, and the Inflow/Outflow of Money on Options.
The answer is an emphatic yes. Part of the reason, is that Options are a measure of the expectations for the stock market during the next 30 days. When money is flowing net positive into Options, the market bias is "UP". When money is flowing net negative ... out of Options, the market bias is "DOWN".
This relationship is important enough for us to pay a large fee for the data and track it every day. We post the chart of this as Section 1, Chart 2 for our regular subscribers each day. Today, we are posting it as a Free member courtesy (see the chart below).
Here is how this chart works:
There are 3 components to the chart. At the top of the chart, you can see the "Options Timing Indicator". This indicator is an action summary of the two indicators at the bottom of the chart.
The two indicators at the bottom show the Inflowing Liquidity levels on Options, and the associated bias of those levels. Note the there are two horizontal lines on the "Inflowing Liquidity on the Options graph" ... one is Green, and the other is Maroon. When the Inflowing Liquidity is above the Green line, the inflowing money levels are saying that the market is in a strong positive posture. When the Inflowing Liquidity is below the Maroon line, the inflowing money levels are saying that the market is in a strong negative posture.
When you get the chance, spend a few minutes looking at this chart as it will be a "good investment of time". When doing so, also spend a little time looking at the trend lines on the charts ... they tell an important story as well.