Lesson 4 of 6 · Reading the Tape
Premium & conviction
Size cuts through noise.
A $50K premium print can be one retail trader. A $2M print on a short-dated, out-of-the-money contract is harder to dismiss. Large premiums on contracts that expire soon and need a big move to pay off carry more weight than large premiums on long-dated deep contracts.
Premium is field three.
On this alert: $1.2M paid for the NVDA 145 call. That is not a retail order. Field four shows volume well above prior open interest, confirming new money entered. Both fields point the same direction.
This one is an animated diagram in the app. See it in Vero.
It could still be a hedge.
A fund long 100,000 shares of SPY might buy millions in puts just to protect the position. That print looks like conviction on the tape. It may not be. The hedge offsets existing risk, not a new directional view. The opposing leg rarely shows in the data.
A $3M put sweep hits two weeks before expiration, 8% out of the money. What is the right read?
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B. Possibly a hedge, possibly directional, impossible to confirm without the opposing leg. Large premium does not rule out a hedge. Without the opposing leg, both explanations fit the data.