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There’s a trade pattern I watch for that tells me more about conviction than just about anything else in the options market.
It’s when a big player — usually an institution — places a block order and pays above the ask.
Most folks see that and scratch their heads. Why would anyone pay more than they need to?
But when you understand what’s really happening, you realize it’s one of the strongest bullish signals you can get. These oversized orders don’t just express conviction — they can force market makers to start hedging in size.
When a market maker sells calls, they often have to buy stock to protect themselves, and that buying can push the underlying even higher. The call starts controlling the stock, and the tail ends up wagging the dog.
That’s when the options flow stops being a side story and starts driving the move.
The Psychology Behind The Extreme Strike
Let me walk you through a real example I analyzed recently.
Someone placed a block order at the $1,600 strike on a stock trading around $1,100. That’s a big move — a significant out-of-the-money (OTM) position that tells you this player is thinking big.
Here’s the interesting part about the psychology: When you’re looking at a $1,100 stock and you’re willing to pay for the $1,600 strike, it looks pretty good right now. You’re locking in that level, booking the trade, getting it done.
But when that stock actually hits $1,600, those same players aren’t thinking about taking profits. They’re thinking it’s going to $2,000, and they’ll be scrambling to buy those $1,600 strike calls back.
Meanwhile, sellers who were calm when the strike looked impossible start panicking as the market races toward their level, adding even more fuel to the move as they rush to hedge or close positions.
That’s how momentum feeds on itself, and it’s even more powerful when price pushes into new high territory.
Once a stock clears a major level with no overhead supply, the market gets thin and there isn’t much resistance left. Add aggressive option buying on top of that, and you create a self-reinforcing move that’s hard to stop.
When Price Isn’t The Issue
Now let’s talk about what it means when buyers are willing to pay above the ask.
A block order is usually an institution or big player who wants it all at one price — sometimes below the bid, sometimes above the ask. They’re not messing around with the mid-price or waiting for a better fill.
When they pay above the ask, they have to have it. The price isn’t the issue — the fill is the issue. They want to lock in that strike, and they really don’t care about price.
And from the market maker’s side, it makes sense. They take on real risk filling these trades. It’s easy for them to lose money if the stock rips, and that risk gets reflected in wide spreads and volatile pricing at extreme strikes.
So when someone bulldozes through the ask, they’re signaling urgency — and sometimes information.
You can even see it in the tape. Trades at the bid are usually sells, trades at the ask are usually buys, and anything above the ask means someone wants in right now.
In a market that’s deeper and more liquid than ever, these extreme prints happen more often, but the aggressive ones still stand out.
Anytime a buyer is willing to pay more than the posted price, they’re telling you something. The only question is whether you’re paying attention.
Trade well,
Jack Carter
Jack Carter Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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Disclaimer: We develop tools and strategies to the best of our ability, but we can’t guarantee the future. There is always a risk of loss when trading. Past performance is not indicative of future results. From 1/1/21 through 4/2/26, the average return per options trade alert published in real time (winners and losers) is 3.37% in 3 days, with a 96.2% win rate.
