Whenever traversing complex market cycles — such as the present juncture — monitoring options flow can be a vital tool. Rather than merely following volume and open interest dynamics in the derivatives market, options flow focuses exclusively on big block transactions likely placed by institutional investors. This means that small-time transactions are ignored, facilitating more focused analyses.

Fundamentally, the biggest advantage that options flow provides is the potential unveiling of institutional sentiment. Essentially, large block trades and unusual options activity can signal what hedge funds or other institutional players are doing behind the scenes — moves that don’t always show up in regular stock volume metrics.

Another possible benefit of monitoring options flow is the identification of major swings before they materialize. For example, when big money moves into far out-of-money call options with near-term expiration dates, such transactions could tip off moves that have yet to happen. Obviously, having foreknowledge of a robust trajectory could be quite lucrative.

Finally, the composition of transactions — such as bought calls or sold puts — can help determine the “character” of sentiment. For example, a debit-based transaction may imply high conviction toward a particular outcome, whereas a credit-based approach may signal belief without complete confidence. Understanding these nuances can really give retail investors an edge, especially with these three stocks to watch.

Walmart (WMT)
On Monday, Walmart (NYSE:WMT) represented one of the most actively traded securities that made up Barchart’s unusual options volume list. Total contracts traded on the day stood at 137,047 against an open interest reading of over 1.6 million contracts. Notably, call volume greatly outpaced put volume, 98,638 contracts to 38,409 contracts.

Drilling into Walmart’s options flow data, net trade sentiment clocked in at over $8.3 million, overwhelmingly favoring the bulls. In total, gross bullish sentiment reached $9.515 million while gross bearish sentiment was $1.214 million.

The biggest single transaction 5,600 contracts of the $85 call expiring Jan. 15, 2027. At the time of the trade, the ask stood at $15, meaning that the breakeven price for the aforementioned calls is $100. Interestingly, the 52-week high for WMT stock is $105.30.

Another intriguing trade within Walmart’s options flow was for 450 contracts sold of the $85 put expiring June 20 of this year. In this case, the bid was $3.55, meaning that the transaction’s breakeven price is $81.45. Put another way, the put sellers are underwriting the risk that WMT stock won’t drop below this point, lest they be forced to buy the security under exercise.

There’s another takeaway here: the put sellers are signaling that the low $80s represent an ideal entry point into WMT stock. Given the importance of the big-box retailer, I’d say that’s a reasonable assumption.

Harmony Gold Mining (HMY)
Nothing shines brighter than gold during times of economic turmoil and the whales have really latched onto this message. Take a look at Harmony Gold Mining (NYSE:HMY). Since the start of the year, HMY stock gained almost 80% of equity value. It’s still climbing, with the security benefiting from a 5% pop on Monday.

Sure enough, Harmony ranked among the top highlights in Barchart’s unusual options activity screener, seeing 10-,363 contracts traded on Monday. Most of these were for call options, number 7,201 contracts versus put volume of 3,162 contracts.

Looking at options flow, net trade sentiment landed at $132,600, favoring the bulls. Gross bullish volume reached $213,300, whereas gross bearish volume measured $80,700. Notably, the most optimistic trade was for 480 contracts of the $15 call expiring April 17. The premium was 45 cents, meaning that HMY stock must rise to $15.45 for the aforementioned calls to break even.

At the moment, HMY’s 52-week high stands at $14.79. Therefore, the hundreds of bought calls (which expire in less than three weeks’ time) suggest that Harmony still has some legs remaining.

That’s the power of understanding options flow — you have an empirical basis to guide your decision-making process rather than blind guessing.

Fluence Energy (FLNC)
While the whales are smart with their money, they occasionally engage in high-risk, high-reward wagers — just like everyone else. Interestingly, Fluence Energy (NASDAQ:FLNC) managed to attract the heavy hitters.

On Monday, FLNC stock made the list of unusual options activity, with 11,217 contracts traded against an open interest reading of 115,558 contracts. This volume figure represented a nearly 235% lift over the trailing-month average. Further, call volume on the day stood at 10,492 contracts versus put volume of 725.

Looking at Fluence’s options flow, net trade sentiment hit $721,700, firmly favoring the optimists. Gross bullish volume reached $759,100 while gross bearish volume only measured $37,400.

The biggest transaction among long-side traders was for 1,986 contracts of the $8 call expiring Jan. 16, 2026. Featuring a premium of 95 cents, FLNC stock would need to reach almost $9 to break even. That’s quite optimistic, considering that shares currently exchange hands for less than five bucks.

Nevertheless, Fluence’s underlying energy storage solutions business is a relevant and much-needed enterprise. If you want to take a longshot wager, FLNC stock could be a tempting proposition.

— Joshua Enomoto

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Source: Money Morning