“Prior to the Russian invasion of Ukraine and inflation going through the roof, there was an explosive growth of equity options market that attracted a lot of media attention, DeSimone said. “Every other week, there was some discussion about [how] notional volume of the derivatives market is larger than the stock market,” he said, adding that this was posing the question: Do we have the tail wagging the dog?

The term “Gamma squeeze” became a de-facto explanation for anything to do with volatility, but DeSimone said his team wanted to know which exposures really matter.

OptionMetrics constructed a measure dubbed Demand for Options Order Delta (DOOD). This metric is calculated as the aggregate sum of delta multiplied by net signed option trades scaled by daily stock volume. In other words, it is a measure of excess demand imbalance for delta by end-users of options.”

OptionMetrics’ Garrett DeSimone presented new research on Demand for Options Order Delta, or DOOD, at last month’s Global EQD conference. Learn more about the key takeaways in the article below.