Understanding Dark Pool Prints

dark pool

Dark pool print orders can only be found on private exchanges and are only accessible to institutions that cannot be accessed by the general public. At the moment, it is estimated that about 40% of all institutional trading happens on these “shadow” exchanges. When large investors are looking to trade massive equity blocks, they’ll look to buy or sell their positions to major banks or firms who can take on that large premium and provide faster liquidity while also providing lower transaction costs.

One major benefit of dark pools is that institutions who would like to sell one million shares of AAPL for example, can do so without impacting the public markets in a negative way. Something to understand is that there is not a public order book available. What this means is that the buyers and sellers of these large blocks remain hidden and do not disclose their trading intentions. Only after some time are the actual details of the trade released to all the major exchanges and made available on the tape.

Tips on trading dark pool prints

Since these orders do not provide us with clear intent on whether the trade was a buy or a sell, we can look at various strategies for clues that can help us get a clearer picture of what could be happening off the exchanges.

Dark pools and options order flow data

One of the best ways to gauge sentiment is to combine it with options order flow data. When you’re able to see both data sets, it is much easier to draw conclusions of whether a possible bullish or bearish breakout is imminent. We can look at the following example on Nvidia (NVDA):

On May 17th, 2024, we spotted a very large and rare dark pool print (order) that came in deep after hours. This order was for $924 million. The last time we saw an order with this size was August 2023.

Analyzing the options order flow data from May 13th to May 21st, leading up to the anticipated earnings report, we observed a strong bullish sentiment. Specifically, 66% of the orders were call options, with significant premiums exceeding the ask price. This strongly suggests that the dark pool orders and option contracts were being purchased by institutions.

On May 23rd, NVDA surged following the release of their earnings report, which significantly exceeded market expectations.

NVDA dark pool and options order flow chart

Look for trades that don’t hit the tape as much

If you notice a trade that doesn’t come through as frequently, check the historical data to get a better sense of how “unusual” this order is. This may mean an institution is starting to build a position in the stock.

Additionally, pay attention to the stock’s average daily volume. If the block order coming in takes up more than 30% of the daily average, this makes the dark pool print very significant and worth watching.

Use the strangle options strategy

If you’re still unsure of the direction and are eager to place a trade, we recommend implementing a simple strangle strategy to help you minimize losses. You can follow this setup:

  • Try to get some time behind the trade. Look for a contract that is 4 weeks out and slightly out of the money, if possible.
  • Keep your contracts even. If you buy a call option for $1.00, look to purchase a put option for $1.00 as well.

When should you cut losses? This depends on how long you intend to hold. For example, if you’re doing a day trade, it’s probably wise to quickly cut out of the losing position soon after it starts going against you. However, If you’re holding for a couple of days or weeks, it might be wise to just let the losing position go to zero. In either scenario, it’s best to stay hedged.

Support and resistance levels

Using dark pool prints for support and resistance levels can be helpful in identifying key areas where price may either find support (dark pool buying) or resistance (dark pool selling). Although we dont have a guarantee when these prints are buying or selling, watching how price reacts around them are crucial to understand. Here are some tips to pay attention to:

  • Look for large premium over $100 million and watch for supporting options flow.
  • Check if there are any other technical indicators, such as trend lines or moving averages that converge with the potential support or resistance level from the dark pool print.
  • Look at the volume of the dark pool print to see if its significantly higher than the average daily volume of the stock or ETF.
  • Wait for a retest of the dark pool level and look for bounces or resistance. Check the order book for volume at that level when price reaches it. High volume with support or resistance can give clues as to the intent of the dark pool print. 

QQQ level distribution example

On May 5th, 2023 the ETF QQQ which tracks the NASDAQ100 saw a $557 million “signature” dark pool print at the 316 level and another $600 million at the 322 level. As you can see from the chart provided by Cheddar Flow, price bounced perfectly as support from these two levels. On top of that, we can look at the options flow to determine if call buying also took place.

QQQ dark pool levels

Pay attention to the spot price and expiration date. There was a $519K call sweep order for the 316 strike and another $633K call sweep for the 315 strike. This shows the confluence between the dark pool print and options flow and one can reasonably assume institutions were buying in the dark pools at these levels. 

QQQ call sweep order flow

SPY level distribution example

On May 5th, 2023, the ETF SPY which tracks the S&P500 saw a $1.8 billion “signature” dark pool print at the $405 level. With this, you can also see a perfect support test along with significant call sweep order flow. It would be safe to assume that institutions were buying in the dark pools at this level.

As you can see from the two examples above, paying attention to how price and options order flow reacts around these dark pool prints are extremely important. Traders will be able to gauge institutional investor sentiment and potential future price movements. Make sure to mark these levels on your chart when you see significant dark pool prints. 

Dark pool signature prints

Any order labeled “signature print” is reported about 24 hours late. These orders are actually traded internationally particularly through a European trade desk which allows them to be reported late. Signature prints mainly cover these ETF’s (SPY, QQQ, IWM, DIA) with SPY being the most active one.

When this information is utilized correctly, this can provide powerful insights into possible market direction. We highly recommend you watch this video that provides more in depth analysis on these type of trades.

Final thoughts

In all honesty, it really doesnt matter if we are able to see if the orders were buys or sells. If someone bought a very large position, that also means that someone had to sell that position. In the end, what really matters here is price action.

If you’re looking for real time options order flow and dark pool data, Cheddar Flow provides them all in one place for you. See all the information as it hits the tape in real time and be able to search historical data points to understand general market sentiment.


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