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tagoma
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Posts: 18612
Joined: February 21st, 2010, 12:58 pm

Net Options Pricing Effect (NOPE)

April 11th, 2021, 7:59 am

You've probably heard of Lily Francus' NOPE (net options pricing effect) lately as she has been everywhere in the media space since the GME story.

The FT sums it up:

"[NOPE] is a rough-and-ready (...) gauge of the weight the options market is exerting on the stock market. It estimates the amount of the liquidity available in a certain stock or index that is being sopped up by options dealers’ hedging (it is only an estimate, because dealers have other ways to hedge than buying the shares). It is calculated as the delta of all the outstanding “call” options to buy stocks, less the delta of all the “put” options to sell them, divided by the total daily volume trading of the shares. 

My question to you options gurus: Is there anything new (i.e. that had never been intuited/observed/mesured/traded before) in there?

Thank you.
 
leptoq
Posts: 56
Joined: February 15th, 2018, 4:42 pm

Re: Net Options Pricing Effect (NOPE)

April 13th, 2021, 3:38 pm

You've probably heard of Lily Francus' NOPE (net options pricing effect) lately as she has been everywhere in the media space since the GME story.

The FT sums it up:

"[NOPE] is a rough-and-ready (...) gauge of the weight the options market is exerting on the stock market. It estimates the amount of the liquidity available in a certain stock or index that is being sopped up by options dealers’ hedging (it is only an estimate, because dealers have other ways to hedge than buying the shares). It is calculated as the delta of all the outstanding “call” options to buy stocks, less the delta of all the “put” options to sell them, divided by the total daily volume trading of the shares. 

My question to you options gurus: Is there anything new (i.e. that had never been intuited/observed/mesured/traded before) in there?

Thank you.
My 2 cents. The effect itself is not new. The impact of delta hedging on underlying was studied before, options pinning/pushing is known to practitioners. What;s really new recently is the amount of RH trader kids who use options aggressively on an unprecedented scale to get extra leverage.