Net Premium Flow Analysis
Track where the big money is going by analyzing premium flow direction
What Is Net Premium Flow?
Net premium flow measures the total dollar value of call premiums minus put premiums traded at each strike price. Positive net premium at a strike indicates more bullish activity (call buying or put selling). Negative net premium indicates more bearish activity (put buying or call selling).
Why It Matters
Premium flow reveals where institutional traders are placing their bets. A large cluster of positive net premium above the current price suggests big money is positioning for upside. Heavy negative net premium below the current price signals hedging or bearish bets.
Reading a Net Premium Chart
The chart shows bars at each strike price. Green bars above the zero line represent net call premium. Red bars below represent net put premium. The magnitude tells you how much money is behind each position. Look for unusual concentrations — these often mark key levels where institutions expect the stock to move.
Key Terms
Net Premium — Total call premium minus total put premium at a given strike
Premium Flow — The directional bias implied by options trading activity
Institutional Flow — Large trades typically associated with hedge funds and asset managers
Sentiment — The overall bullish or bearish lean of options positioning