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Correlation of FTDs and OTM put open interest #12

Open JonathanMcFall1 opened 3 years ago

JonathanMcFall1 commented 3 years ago

Link to your reddit username u/Jonathan_McFall

Propose your question or request I have found a decently strong negative correlation between FTDs and deep OTM put open interest, which lines up with the hypothesis that shorts use options tricks to reset FTDs and hide true short positions. I think a further examination into this options activity and its relation to FTDs is necessary and would probably be better done by you guys. Here is the spreadsheet I used that contains some FTD data for easy access in statistical tests (https://docs.google.com/spreadsheets/d/1-3SppP4LkhWJvjNPaSgN9-9ofhJ5hbaodNuFF049Hro/edit?usp=sharing). I will also be attaching an excel file if that is your preferred spreadsheet program.

Describe alternatives you've considered The huge spikes in OI could be a volatility play by some large fund, but I highly doubt it as there have been times where the puts are worth significantly more than they were purchased for, but they were not sold. Also these far OTM puts are essentially worthless, so it's more likely that someone needs them for some specific purpose. I highly suspect Kenny and Co. of using the tricks outlined in this SEC paper (https://www.sec.gov/about/offices/ocie/options-trading-risk-alert.pdf) and the negative correlation found strengthens this hypothesis.

Additional context I pulled the FTD used for testing straight from the SEC's website, and the open interest data from ThinkOrSwim and Barchart. I've also posted a DD with a better explanation (https://www.reddit.com/r/Superstonk/comments/o1sggl/the_hidden_shorts_the_correlation_of_ftds_and/).

FTDs Compared to Open Interest of OTM Put Options for 7_16.xlsx

xpurplexamyx commented 3 years ago

Hello,

Thanks for raising this request! What source did you pull the historic OI dataset you used from?

Thanks! Amy

JonathanMcFall1 commented 3 years ago

I'll be honest I didn't see this reply until right now, so sorry for the late response. The OI data is from different options chains on www.barchart.com. I chose strikes from 7/16 and 1/21/22 that had OI > 10,000