Learn How to
Follow the Smart Money®
The #1 Way We Choose Our Trades—Free!
Learn the #1 way that Jon and Pete Najarian choose their trades — all laid out in an easy-to-understand format.
In Follow the Smart Money®, Jon and Pete Najarian will teach you how they trade unusual option activity every day—step-by-step from identifying the trade, to confirming if it is unusual, to choosing the right options strategy.
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“You’ve seen us talk about it on CNBC’s Halftime Report™ & Fast Money™. Now, in our new book, we’re revealing how we use unusual options activity to Follow the Smart Money®!”
–Jon & Pete Najarian
“We have watched Jon and Pete on CNBC for years. It only took a matter of minutes for us to realize and appreciate the true power of Unusual Option Activity.” – Bruce W.
“Almost feels like cheating! Couldn’t imagine working without it ever again.” – Tom B.
“I have learned how much I didn’t know and feel I am now in the right direction to make much more profitable trades!!” – Walter S.
How to follow the smart money®
The hunt for the smart money begins with uncovering the footprints they leave behind on the options chain. There are several tells that you’ll want to be aware of when trying to identify unusual options activity.
Here are a few basic tells for identifying smart money moves:
Oversized trades on a short time frame
First, you’ll need to identify unusual activity that is relatively large in size with an expiration date that is on a short time frame. An inside trade doesn’t need to buy extra time; they know precisely when then the stock is expected to move. So, their trades will typically be short-term in duration and large in size.
Also, take note of large trades that occur on strikes with little to no open interest (contracts held from prior trading sessions). The smart money doesn’t concern themselves with average contract volume or open interest to mask their order. Their goal is to get in fast at the most opportune moment.
Opening orders not tied to a stock purchase
There are legitimate reasons large orders may come across the tape. For instance, some institutions may need to hedge an order of stock in the options market. Or a hedge fund may be building a position in a company and use options as a way to do that.
To find the smart money, you must filter out all the noise. That means limiting your search to opening orders that are not tied to a stock purchase or sale. The smart money places new orders and doesn’t bother to hedge them with stock.
Out-of-the-money calls or puts with astronomical odds
Options account for the current price of the stock, its volatility, the time to expiration, interest rates, dividends, and the strike price. In normal circumstances, these are fairly priced — meaning that they accurately reflect all known knowledge. So, in theory, there shouldn’t be an edge to them.
However, the smart money has knowledge not reflected in the price. They’re oftentimes willing to pay prices that others may not be willing to pay. If someone is buying short-term out-of-the-money options and paying the offer for them in large size, it suggests the market’s pricing of them is wrong.
Learn more about how to uncover smart money moves. Check out Three Keys to Identifying Unusual Option Activity.
How we Follow the Smart Money®: Heat Seeker®
At Market Rebellion, Jon and Pete Najarian go way beyond the basics of tracking the smart money. They use their proprietary Heat Seeker® algorithm to help them analyze all the options order flow, filter it for what may be unusual options activity, and further scrutinize it. That allows them to determine if it’s truly a trade worth following or just an unusually large order.
If Heat Seeker® identifies a particular trade that meets their parameters as being truly unusual, and its technical and fundamental analysis checks out — they’ll pounce.
The patented algorithm captures every single options trade placed in the market. That’s 180,000 trades per second. All in an effort to filter through the fog and determine if someone is trading with knowledge the rest of us lack. It collects all the order flow data in real time and tries to identify compelling activity ahead of what might be market-moving events.
To put it simply, the system helps uncover extraordinary buying patterns that can tip them off before a stock moves. It’s some pretty amazing stuff that gives the Market Rebellion trading community an edge when following the smart money.
Find out more about Heat Seeker and how we help our members trade unusual options activity by reading How We Trade Unusual Options Activity.
So, you believe you’ve identified unusual options activity driven by a smart money trade. The next step is to build a trading plan and jump in with a trade of your own.
The main idea behind unusual options activity is simple on its face: find unusually large options trades and then follow them. But in reality, trading unusual activity is harder than it looks.
Jon and Pete Najarian have spent decades following the smart money. From the floor of the CBOE to today’s fully electronic market — they’ve had plenty of time to refine their techniques.
It turns out, there’s much more to trading unusual options activity than simply finding and copying a trade you believe to be smart money. That’s why Jon and Pete have created a process for trading unusual options activity known as the F.R.A.M.E. method.
Let’s break down their F.R.A.M.E. method and questions you should consider when trading.
By following this strict process and remaining disciplined with their trades, Jon, Pete, and the rest of the Market Rebellion team of traders increase their chance for success.
Discover more about how you can effectively Follow the Smart Money® and trade unusual options activity. Check out our Insider’s Guide to Trading Unusual Options Activity.
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