What Makes Volland the Best Source for Option Dealer Positioning?

Traders: the quality of your data counts.

As an institutional trader myself, I searched for years to find high fidelity, usable, granular options dealer positioning data. It simply wasn't out there, so we built it ourselves. 

Read more about why Volland is the very best in its class.

DATA PROCESSING AND STORAGE

The most significant differentiator is in how we process and store data. That is our big advantage. 

You can have pretty pictures, but if the data sucks, you will lose. 

As far as data is concerned, in particular dealer determination, here are the different styles:

Midpoint determination
This uses the top of book bid/ask along with execution price to determine ownership. 

• Advantages: more accurate than all other methods (including the pervasive GEX). At least shows some calls and puts being bought and sold respectively. 
• Disadvantages**: There are way too many common scenarios where this is incorrect. You need the OPRA feed and an exchange license to do this, it requires more computation than GEX, so not necessarily as fast. You also need to store the trades to get a full book view.

**Note: Volland has the brainpower that has overcome the disadvantages of this method. To account for top of book problems, we use "shallow book". To help with borderline executions, we use a fair value instead of midpoint, but they are usually close to the same. We also use some other little fixes to help with late transactions and spreads. 


Here are the other methods for comparison.

"GEX"
Assuming all puts are bought and all calls sold using OI. 

• Advantages: really easy to quickly calculate, right maybe ±75% of the time. 
• Disadvantages: while many puts are bought, there are a lot sold as well, so there is no telling the magnitude of each strike. The magnitude is false as they see it, which makes GEX useless and obsolete. Further, this is practically useless on individual stocks since many stocks have speculative buying of calls. In fact, even in indices there are more iron condors on 0DTE, showing very strong gamma if calculated incorrectly.

Most attempts at dealer positioning services do "GEX" because it is cheap, easy, and sometimes right.

DDOI
DDOI stands for Dealer Derived Open Interest. It looks retroactively at slight changes to IV with every trade made.

• Advantages: uses actual order flow, conceptually a true statement of how dealers deal with excessive flows.
• Disadvantages: for highly liquid option underlyings, DDOI neglects the vol changes from skew, liquidity, and projected event volatility. It completely discounts all IV regimes except for sticky strike, so it doesn't work a lot of the time. In short, while conceptually very good, it would only work on illiquid products with outsized transactions and an uneven vol plane, particularly intraday if you get OPRA or CBOE TradeAlert data.

Only showing the options executed at the bid and the ask

• Advantages, catches all the market orders on options, which move their price the most. Quick to calculate, but not as quick as GEX. 
• Disadvantages: ignores option trades executed anywhere in between the bid and ask, which are 60% of the trades on its best day. Time lapse transactions make this false as well (I there is a half second before a limit order is filled, it will categorize it incorrectly). Need to store all categorized trades.

As of this writing, this method is done by a few well-known services who claim not to use "naive GEX"... except they don't store the transactions, so they are showing just the new positioning on the day. This data is really crappy.

CBOE Open/Close Data

• Advantages: Data comes directly from the exchange.
• Disadvantages: comes out every 10 minutes. Only categorize trades in 5 broad categories, so if there is a dealer-dealer trade, that second dealer is probably not hedging... so need to make assumptions on that. Can only do SPX unless you buy open/close data from all the exchanges and that would cost hundreds of thousands of dollars monthly. You don't know execution price, so can't do IV related greeks.

As of this writing, this is the method used by a well-known service's new tool. The marketing is fancy, since you can claim you get your data straight from the exchange, but once you go down the rabbit hole, you'll know there are problems with it.

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OTHER DIFFERENTIATORS

1. Because Volland processes and stores data in its unique style, Volland can determine dealer net premium position. This is good for determining when dealers need to hedge gamma.
2. Volland can determine execution quality. (Our liquidity metric, which no one else has real-time, can determine how stressed dealers are in their pricing.) 
3. We have the most accurate notional hedging in each greek (the vanna, delta, gamma, charm hedging data).
4. Because Volland stores all trades, it is the only platform that can give aggregate greek trend, something that has been shown in our white paper to be a leading indicator of market moves (vanna for swing, charm for 0DTE)
5. We calculate our own VIX, which means we have spot-vol correlation for every stock we do.
6. Because we have 250 stocks, etc. with stored trades, our earnings trades pay for Volland themselves... no one else can dream of offering that. (Maybe GEXers, but it would be really wrong.)


IN CONCLUSION...

If you are a serious trader, Volland is the best where it counts. The innovators at Volland continue to bring you new features and opportunities to use the data in your trading ventures. We look forward to welcoming you to our Volland community of users and traders.