Spy put volume and open interest

[Kevin Schmit]

50k contracts traded with no change in OI on a normally lightly traded strike would be unusual. I doubt that is what actually took place I think that the answer to the conundrum lies in the fact that open interest is usually reported with a one day lag compared to volume. You will probably see the change in open interest reflected in tomorrow's reported OI.

I note that OptionsX3 also posted about the one day OI lag, but no one picked up on it.

 

[FSU]

That's correct ...... and open interest stays the same.

Actually probably not true. If some one opens and closes in one day open interest will most likely increase. Say I buy one contract in SPY, market maker sells me. I later sell it out. Unless the exact same person buys it from me (which is unlikely) another person/market maker will have bought it from me. So you have two different entities holding a position in the option and the open interest increases.

 

[raf_bcn]

Hi

in the fact that open interest is usually reported with a one day lag compared to volume

Thank you for the response. I must confess is the first time I hear this.
Can anyone confirm this?

Unless the exact same person buys it from me (which is unlikely) another person/market maker will have bought it from me.

Yes yes, if you close your option and the other side is not the same as the first transaction, the volume will be +2, and the open interest +1, as the contract is still opened.
So a volume of 2, can increase the OI by 0, 1 or 2.


Today the OI is 13k
So we had a volume of 50k that didn't increased the OI, nor one day after neither two days after.
Probably it was 25 k contracts opened and closed by the same two participants.
Or it can be another possibility that will explain the fact that I was early assigned. Someone buyed 50 k put options and early exercised at the end of the day.
That also would cause the OI remain equal.

So there is a missing part in the equation, the number of exercised options. I could not find that value.

Anyone knows a service that provide that number? Why is so difficult to know that value ?

Thanks.

 

[rb7]

Actually probably not true. If some one opens and closes in one day open interest will most likely increase. Say I buy one contract in SPY, market maker sells me. I later sell it out. Unless the exact same person buys it from me (which is unlikely) another person/market maker will have bought it from me. So you have two different entities holding a position in the option and the open interest increases.

This is not totally true.
Market maker positions are netted at the OCC.

And more, if you close your position, your counterpart does not need to be the same 'person' as the one who were there when you opened it. That's what a clearing house is used for. When you opened and closed a position, that can translates to a OI variation of +2, 0 or -2.

Open Interest variation = (New opened trades - (New closed trades + New exercised positions)), whoever is opening and closing and exercising.

 

[raf_bcn]

Hi

This is not totally true.
Market maker positions are netted at the OCC.

I don't know exactly what you are saying with netted. If the market maker positions are netted at the end of the day, that means that the mm positions doesn't appear in the OI.

Imagine a OI = 0
If I buy to open an option to a market maker A , and in the same day I sell it to the market maker B , you are saying that the new OI will be 0, isn't it ?
But the fact is that the contract is still open, the participant A has a short option and the participant B has a long option.
Can you clarify this? please

thank you.

 

[rb7]

Hi



I don't know exactly what you are saying with netted. If the market maker positions are netted at the end of the day, that means that the mm positions doesn't appear in the OI.

Imagine a OI = 0
If I buy to open an option to a market maker A , and in the same day I sell it to the market maker B , you are saying that the new OI will be 0, isn't it ?
But the fact is that the contract is still open, the participant A has a short option and the participant B has a long option.
Can you clarify this? please

thank you.

You don't open a position when you buy, and you don't close a position when you sell, except if you are a Market Maker (that what's 'netted' means).
You open when your trade (or order) is flagged as 'Open' (buy or sell) and you close when your trade (or order) is flagged as 'Close' (buy or sell).

In your example above, if you buy to open and sell to close in the same day, both with a Market maker as the counterpart, then yes, the OI variation will be zero.

 

[raf_bcn]

Hi

ou open when your trade (or order) is flagged as 'Open' (buy or sell) and you close when your trade (or order) is flagged as 'Close' (buy or sell).

Yes, I know the difference between BTO BTC STO STC. Only when the two sides are opening it makes a new contract.

In your example above, if you buy to open and sell to close in the same day, both with a Market maker as the counterpart, then yes, the OI variation will be zero.

But in my example, the two Market makers were opening a contract, so I don't understand why this new contract would not appear in the OI.
Please it is not that I don't trust you but is better to contrast the things that one reads in a forum.
Can anyone confirm this, or direct to a document that demostrates it.

When you opened and closed a position, that can translates to a OI variation of +2, 0 or -2.

When you open and close a position, that would traslate to a OI variation of -2, -1, 0, +1, +2.
So a little difficult to know it.

Thanks.

 

[rb7]

MM positions are netted, meaning when they buy, they open a position, when they sell, they close a position.

Your math in the OI variation is wrong. When you open and close a position, the OI variation from your trades is zero. For the counterparts, it's either +2 (both were openiong), 0 (one opening one closing), or -2 (both closing).

 

[raf_bcn]

MM positions are netted, meaning when they buy, they open a position, when they sell, they close a position.

So if a market maket is selling an option that he doesn't hold, they are not selling to open but are selling to close. Is that right ?
That is very difficult to understand. How is he selling to close a position that he doesn't had ?


Sorry but I don't think my math is wrong, I am only thinking it , I don't want to be categorical. And I'll be grateful if you show me where I'm confused.

I will show you with an example.

I BTO and the other side STC variation = 0
a little after,
I STC and the other side BTC variation = -1

Total OI variation = -1

Knowing this won't make us rich, but you said it's basic and better to understanding it before going forward.
And now yes, you are giving your two cents. Thank you.

please @tommcginnis you could also give me some likes , cause I am the one who is right. hehehe kidding.

 

[rb7]

So if a market maket is selling an option that he doesn't hold, they are not selling to open but are selling to close. Is that right ?
That is very difficult to understand. How is he selling to close a position that he doesn't had ?


Sorry but I don't think my math is wrong, I am only thinking it , I don't want to be categorical. And I'll be grateful if you show me where I'm confused.

I will show you with an example.

I BTO and the other side STC variation = 0
a little after,
I STC and the other side BTC variation = -1

Total OI variation = -1

Knowing this won't make us rich, but you said it's basic and better to understanding it before going forward.
And now yes, you are giving your two cents. Thank you.

please @tommcginnis you could also give me some likes , cause I am the one who is right. hehehe kidding.

Market maker are usually flat at the end of the day. And yes, they can sell to close a position that he's not holding (because it's a virtual contract, so-to-speak).

Let me use your example.
You BTO and the other side STC: variation = 0, because 1 contract was opened and 1 contract was closed.
You STC and the other side BTC: variation = -2 (not -1), because 2 contracts were closed here, not one.