Options / Flow#457tier 3experimental liveNew

`option to stock volume ratio`

cadence: Dailydata: mediumshort onlylong onlylong short

2012

Johnson, T. L., & So, E. C. (2012). The option to stock volume ratio and future returns. Journal of Financial Economics, 106(2), 262-286.

Read the paper →

What it checks

Johnson & So (2012): the ratio of total option volume to equity share volume (O/S) negatively predicts the underlying's 1-week return (~0.34%/wk on the spread) because short-sale-constrained negative-information traders migrate to options. Backtest uses pre-2023 options history while the live options feed is being rebuilt.

Mechanism

Johnson & So (2012): the ratio of total option volume to equity share volume (O/S) negatively predicts the underlying's 1-week return (~0.34%/wk on the spread) because short-sale-constrained negative-information traders migrate to options. Compute daily O/S = (calls_contracts_traded + puts_contracts_traded) / equity volume, z-score over 252d per ticker, SHORT high-z, LONG low-z, 5-20d hold.

No production champion data for this family yet. Stats appear once the discovery pipeline promotes at least one strategy with this family tag, or once a multi-family blend that includes it earns a champion slot.

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Signal rule

Johnson & So (2012): the ratio of total option volume to equity share volume (O/S) negatively predicts the underlying's 1-week return (~0.34%/wk on the spread) because short-sale-constrained negative-information traders

Data dependencies

options_chain_daily
End-of-day OPRA option chains used by IV-skew family.
daily_prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.

Expected edge

Paper window: Modern daily equity data

info premium; decay risk 3/5.

Example tickers where this is likely to fire

SPY AAPL NVDA TSLA

Illustrative only, the signal fires based on the live data, not a fixed list.

Related families

options oi accumulationInsider & Flow

Roll-Schwartz-Subrahmanyam (2010 JF) show that informed traders prefer options over equity for accumulation: option markets have higher leverage and their footprint on stock-price discovery lags. Pan-Poteshman (2006 RFS) and Augustin-Brenner-Subrahmanyam (2019 RFS) extend: pre-earnings and pre-M&A periods show option-flow signals leading equity returns. v1 uses TOTAL-CHAIN call_OI as a softer proxy for LEAPS-only OI (per-expiry granularity comes forward via IBKR snapshots). Long when own-history 60d z-score of calls_open_interest ≥ +2.0 AND call/put OI ratio in top decile sustained ≥5 days; hold 60-180 days for the LEAPS thesis horizon. Short on the symmetric collapse.

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option to stock volume ratio