What is Net Options Sentiment?

A short-term signal that ranks how traders value a stock based mostly on pricing dynamics in the options markets. Large institutions, like hedge funds and banks, are a big part of the options markets and have an outsized impact on this signal. By following their moves, investors gain an understanding of how the price of a stock or ETF could move.

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How to Use Net Options Sentiment

Net Options Sentiment has powerful signaling capabilities on important indices like the Top 100 Tech stocks (QQQ) and the S&P 500 (SPY), what is often referred to as “the market”. It has also proven instrumental in Prospero.ai’s weekly newsletter stock picks, which beat the market in 2022 and 2023 by over 100% combined. 

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Net Options Sentiment ranges from 0 to 100 and can be examined for a certain stock or for an aggregation of stocks such as ETFs. (See which ETFs we cover).

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A high Net Options Sentiment rating (80+) indicates more bets by institutions that price will rise. 

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A low Net Options Sentiment (20 or less) indicates more bets by institutions that price will fall. 

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A Net Options Sentiment rating of 50 shows the market is less aligned and more divided over the future price.

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Investors can combine Net Options Sentiment with other metrics to more accurately predict price fluctuations. Here are some examples:

Less Risk of Stock Price Going Down = High Net Options Sentiment + High Upside Breakout + High Net Institutional Flow + Low Downside Breakout 

More Risk of Stock Price Going Down = Net Options Sentiment + Low Upside Breakout + Low Net Institutional Flow + High Downside Breakout

However, for some stocks, like Meme Stocks, it can be harder to separate out retail and institutional pricing behavior. To increase your success rate, consider other metrics like Institutional Flow, Upside Breakout, or Downside Breakout.

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Learn more about stock indices here.

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Learn more about options here.

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Update Frequency and Usage for Net Options Sentiment

Net Options Sentiment updates every 2-5 minutes. This is one of the most important short term signals. It is a great signal to understand how the market views a stock in the short term and can fluctuate widely even in a single day. It is a fantastic tool to increase your success rate for entry and exit as you can be confident it is reflective of the current feelings of the market. As short term investing is inherently risky, and this one changes frequently, you’ll want to keep an eye on it when considering a trade.