Even ignoring the SPX options/futures question it clearly has ~nothing to do with market maker delta hedging. Primarily NOPE measures three things 1. options volume to underlying volume (sets the scale) 2. call volume to put volume (sets the overall direction)
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Sure, you have some (reasonably tight) delta limits and you hedge to stay within those to keep turnover down -- no way that the deltas would get big enough *from the initial options trade* to cause a double digit basis point move in the underlying.
Delta-hedging caused by a move in the underlying is a different story, because every option in the book needs to be hedged, not just the most recently traded options. Magnitude of the required hedge for a given size move depends on book gamma (plus vanna, vol skew shape etc)
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oh sure, I think it's measuring the whole book, the new open interest vs. cumulative volume just tells you when liquidity is thin, if I understand correctly. Certainly without the rest of the book... this would be a different story.
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