Anatomy of a Zero-Sum Game
At the end of the day, how much risk is actually in US equity options? Alphacution distills and presents some never-seen-before numbers from an unprecedented era of this zero-sum game...
More Fun With Robinhood: Mea Culpas
Alphacution falls on its sword to admit errors in attribution of equity index option activity to Robinhood - and offers an explanation for why occasional mistakes like these are a necessary evil of our research process...
More Fun With Robinhood: The Value of Accidental Data
By a quirk of accidental data, Alphacution dramatically sharpens its estimate of Robinhood's engagement with index options since May 2021; an update that has implications for our overall estimate of retail engagement in index options...
Weekly Options Cannibalize PFOF
With latest data in hand, Alphacution shows that the zero-day option (0DTE) phenomenon has contributed to long-term declines in aggregate payment for order flow (PFOF) levels thereby causing a ripple of subtle and not-so-subtle impacts in the market ecosystem...
The Mania Market And The Emotional Money
For the longest time, the use of technology gradually removed excess costs and other inefficiencies from financial markets. This evolution wasn't just about speed, although that was a key element. And then advanced quantitative trading techniques, social media techniques, and mobile-first technologies converged. This is Alphacution's view on what's happened since and what that means for the road ahead...
Tower Research Capital: Seeking Option Traders?
In further preparation for its upcoming case study focused on option market makers, Alphacution identifies a seemingly insignificant shard of evidence that may represent Tower Research Capital's first foray into equity option trading...
Market Concentration: 0DTE Option Volume by Product
Based on new data, Alphacution estimates the total zero days to expiration (0DTE) option volume attributable to index-related products...
Market Terraforming: Zero-Day Options Alter Landscape
Alphacution showcases a subtle yet important impact of the explosive zero days to expiration (0DTE) phenomenon in US equity option markets...
Guest Post: The VIX Is Not Broken
Guest Post: Derivatives specialist, Don Dale, offers a thoughtful case for why the CBOE Volatility Index (VIX) is not broken, despite punditry claims to the contrary. Two pearls of wisdom, up front: 1) Pundits like to complain; and, 2) Be careful what you wish for!
Billions of Orders, Trillions of Shares: Comparing NYSE Arca and IEX
"The big question is whether you are going to be able to say a hearty yes to your adventure."Joseph Campbell The intensifying war between that which happens in the dark and that which happens in the light has finally moved equities exchanges fully within Alphacution's cross hairs. Given our belief that leading market makers and other sophisticated, technology-wielding trading firms are disrupting every stakeholder group in the ecosystem, it should come as no surprise to most of our readers that we would eventually arrive here. Since we are committed to following a trail of data - and harvesting insights based on that data - the arc of themes found here on the Feed are biased more to a combination of a somewhat serendipitous and a somewhat informed journey of old-school research than merely targeted at what appears to be popular in the moment. Besides, sometimes we get lucky and serendipity turns out to be prophetic... We don't know what we'll find until we find it, but we trust that something [...]
