metrics & theory
How we model option positions — open interest, volume, orderflow classification, and Greek derivatives.
Modeling Options Exposure
Options are levered and convex instruments. They can express views on both direction and volatility. Due to capital efficiency, options now represent a dominant proportion of total market activity (cf. Cboe DXTO).
An option contract is a convex liability that market participants must hedge. When options control significant notional liquidity, dealer hedging obligations directly drive underlying spot prices. Underlying spot movements then feed back into option valuations. gexbot captures and visualizes these feedback loops across three primary methodologies:
1. Open Interest (OI)
The Options Clearing Corporation (OCC) tallies overnight "to open" and "to close" transactions, publishing official open interest before each session. OI represents total open contracts, but remains static intraday.
2. Intraday Volume
Where intraday volume exceeds open interest at a strike, new contracts have entered the complex. This signals active positioning shifts and immediate hedging requirements.
3. Orderflow Classification & Volatility Surface Monitoring
Market makers act as the primary counterparties to almost all trades. They do not distinguish between open or close orders; they manage net inventory. When incoming customer demand cannot be matched with offsetting supply, market makers hold convex inventory that must be dynamically hedged with underlying shares or futures.
By monitoring how market makers adjust quotes in real time—tracking aggressor side asymmetries—gexbot models unmatched dealer inventory throughout the session. In quantitative finance, this is known as monitoring the volatility surface (cf. Hau Volatility).
Greek Metrics Catalog
Delta Exposure (DEX)
Directional share-equivalent dealer hedging pressure per $1 change in spot price.
Gamma Exposure (GEX)
Second-order curvature, dealer gamma regimes, and Zero Gamma volatility inflection (S² × 1%).
Vanna Sensitivity
Cross-derivative measuring changes in Delta relative to shifts in implied volatility.
Charm Decay
Time-decay derivative measuring Delta bleeding into session close and expiration.
Higher-Order Greeks
Secondary and tertiary sensitivity modeling: Vomma, Speed, Zomma, Color, and Ultima.
Foundational Theory
Path-dependent delta hedging, soft vs hard deltas, counterparty asymmetry, and Put-Call parity.
Further Learning & Research
Academic papers, whitepapers (Cboe, Hau, Perfiliev), and foundational research on market maker positioning.