The Unusual Whale algorithm uses option order flow to predict movement in the underlying share price of the said ticker.
How does a Whale signal trigger?
There are extremely precise levels of criteria that have to be passed for a Whale signal to trigger a Long or Short idea by analyzing real-time option flow data. Due to the size and nature of these orders, there is a high probability this trader or institution has strong insight as to why the price will move in this direction.
When does a Whale signal trigger?
Whale signals trigger during market hours when an extremely large and unusual option order has been placed and processed by another trader or institution.
How many times does a Whale signal trigger in a day?
The Whale algorithm is designed to trigger on rare option order occasions. With this in mind, it can sometimes be weeks between each signal. There is also the rare chance it can trigger multiple times in a day on any given ticker. There are phases when market conditions are not in favor of trading options and subsequently signals will not be generated as well.
How to trade a Whale signal?
The Oracle is designed to signal a day trade, multi-day, week, or month-long swing idea through option flow as at times it can foreshadow a move up or down in the underlying price.
We have found that these signaled moves happen over the following days after the order is processed with the occasional profit-taking opportunity the day of.
When trading Whale signals we suggest never using 10% or more of your portfolio. We also always recommend you then use a fraction of that 10% on your initial investment to allow room to average down if necessary.
Outliers do occur when signals are generated on an option contract that may be significantly far out of the money or even tied to spreads, iron condors, and even married puts. Though these are worth noting we do not recommend playing the exact same contract as the other trader but better yet taking a much safer contract that has time on its side and is ITM which actually holds intrinsic value.
Since these are merely signals happening in the market in real time we suggest doing your own due diligence before taking these trade ideas as these signals are picking up human and AI orders that both can be wrong at times.
When is a Whale Signal considered a fail?
There are a multitude of ways to consider when a Whale Signal is a fail, though since the goal is to make 20% or more per signal the plan should be to lose no more than 10-20% on any given trade either. Ultimately your stop-loss comes down to your technical levels and personal risk levels as well.
It is worth noting that we’ve seen these signals wait until the last couple of days until expiration to reach the profit-taking goals.
Example of a Whale Signal:
This alert came out on 10/15/21 and the current price was $70.72. CRTX proceeded to fall to $13.20 as of 10/31/21. Whoever purchased these options was not unsure about their choice.
We are always working to improve our signals even if they are great; market conditions are constantly changing on a weekly basis. Though every ticker with options can be registered it does not mean they are the best trade to take at that moment for a multitude of reasons i.g. Going against market conditions and sentiment.