Options, open interest and Greeks

Prerequisite: Complete both Order Flow lessons; distinguish execution delta from option delta.

Original English written learning is available here. Real clean ATAS captures/continuous replays and independent review are not complete. Hypothetical examples are not trading records.

Why a futures learner might look at options

Options can create hedging exposures related to the underlying market. That is a possible contextual influence, not proof that hedging dominates every price move. You need not trade options or purchase a feed to understand the mechanics. A futures chart is not a live map of every option dealer's inventory.

A call gives its holder a contractual right to buy; a put gives a right to sell, subject to exercise and settlement terms. Some index products settle in cash. Strike is the contractual price reference. Expiry requires a date and actual cutoff/settlement convention, not just a label saying today.

Volume versus positions — hypothetical

Start with open interest (OI) of 900 contracts. During the session, 100 contracts trade between two opening parties, 40 between two closing parties, and 200 between one opening and one closing party. Volume is 340. OI increases by 100−40 =60 to 960. Mixed opening/closing trades change the holder, not the number of outstanding contracts.

One open contract has a long and a short side; it is not two units of OI. High OI does not disclose who is long, who is a dealer or whether the position hedges a different instrument. Published OI commonly reflects end-of-day clearing rather than current intraday inventory; record its actual business date.

Two unrelated uses of delta

Order-flow delta is classified aggressive buy volume minus aggressive sell volume. Option delta is local sensitivity of an option's price to its underlying. They have different units and cannot substitute for one another. Gamma measures how option delta changes with the underlying; vega concerns implied-volatility sensitivity and theta time passage.

Long vanilla calls and long vanilla puts have positive gamma; short positions in either have negative gamma. “Calls positive, puts negative” is not an inherent dealer gamma rule. It may be a vendor inventory assumption and must be labelled as such. Near-money options near expiry often have high gamma, but not every far-out-of-money expiring contract does.

What you may conclude

Large activity at a strike is an attention note, not an automatic floor or ceiling. Put/call ratios can reflect hedging rather than directional conviction. Avoid treating several metrics built from the same OI table as independent confirmations. A hypothesis needs observation and validation; no trading edge is claimed here.

Practice · 4 points

Starting OI 500: 80 opening/opening trades, 20 closing/closing, 100 mixed. Calculate volume and ending OI.
Does ending OI identify dealer inventory?
Is a long vanilla put negative gamma?
Can execution delta +200 be inserted as option delta +200?

Reasoned answer key

1. Volume 200; ending OI 560 (1). 2. No, the net inventory and participant identities are not supplied (1). 3. No, long puts have positive gamma under the ordinary vanilla model (1). 4. No, these measure different things with different units (1).

Ready: 4/4 and explicitly distinguish observed OI from modelled dealer exposure. Proceed to the optional GEX audit lesson.

Education only. Futures involve substantial loss risk. No profit, pass rate or institutional intent is established by these examples. No signup, evaluation purchase or paid feed is required.

Next in the recommended reading order: GEX: hedge mechanics and a data-admission audit