macrocephalopod

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)

3. Intraday moves in the underlying (sets the short-term changes). The indicator is a blend of these three things, if it is predictive it must be because these three components (together or individually) are predictive.

This is probably incorrect.

Only way this works is if there is a delay between options being traded and the dealer hedging the delta, which there will not be. The dealer hedges the delta essentially instantaneously, by the time the trade shows up in the indicator the initial delta has already been hedged.

do you? I thought you guys let it run a bit and only hedged out the net exposure to stay within risk limits. you hedge too much and you hedge out all your profits, is it not so? cc: @VolQuant