In this 187-page, 213-exhibit, 45,000-word case study, "US Equity Option Market Makers: Core Strategies and Market Shares, 2019 - 2023," Alphacution publishes its most comprehensive analysis to date based on the modeling of 17 proprietary trading firms who serve variously as market makers in US equity derivatives across the backdrop of 5 interconnected product classes in futures and options. The objective of this research project was to shed new light on US equity option market mechanics by exploring the products, players and strategies that comprise the dramatic increase in total contract volume – with specific emphasis on the 5-year focus period, 2019 – 2023 , that symbolizes the beginning of a new era in US equity option trading...
After a detailed introductory setup, this report is organized in 3 sections: First, market composition is presented to showcase the volumes and interconnected nature of all relevant US equity derivative product classes. Second, a new strategy factor library is leveraged to highlight core strategy preferences of the 17 members of the "featured option market making group," wherever applicable. And third, based on interpretations from the prior sections, the output of a 2-factor model, that hinges on estimates of weighted average annual trading velocity per market maker, drives the volume share estimates - together, all of which yielding innumerable discoveries and insights about these players and this ecosystem...
Though the unprecedented scale of this case study is indicative, this is Alphacution's current version of a masterpiece; the new crown jewel of a unique research library developed by hand, exclusively with publicly-available data (with the exception of certain daily market data samples), over years of consistent focus, patience and curiosity...
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