If you know of any systematic studies/data on this, please let me know.

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    $\begingroup$ Partial answer: a common assumption is that clients want to buy upside in their portfolio companies but hedge via the index and so dealers are sellers of single name calls and index puts. I haven't seen any studies on this - the people who have the data are incentivized not to share it (plus it's a fragmented market)! $\endgroup$
    – user42108
    Feb 4, 2021 at 0:11
  • $\begingroup$ @user42108 That's very helpful. The key of my question is whether clients buy or sell options to achieve the same (directional) exposure. For instance, to gain upside, they can buy single name calls or sell puts. I imagine they would mostly buy calls, but I'm not sure, and thus the question. $\endgroup$ Feb 4, 2021 at 0:12
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    $\begingroup$ Similar anecdotal assumption is that clients are net sellers of calls due to the prevalence of overwriting $\endgroup$
    – Kch
    Feb 4, 2021 at 0:59
  • $\begingroup$ If you aggregated all positions of all option dealers in any one option market, the net position would have to be short, if we suppose that some non-dealers hold some options (otherwise who'd have sold the options to these non-dealers?). But on an individual dealer basis, it is entirely possible that there will be periods of time when a dealer will be long options (deliberately, to be long Vol for example), and there will be periods of time when the dealer is deliberately short options (i.e to be short Vol). $\endgroup$ Feb 4, 2021 at 10:38

1 Answer 1


Short answer, there are no studies on this. And any that claim to do this should not be trusted, because they can be negatively helpful ;-(

The majority of option business is not conducted over any exchange, but OTC. It's a private transaction between the bank and the client. For every call or put you see in the "call-put ratio" publicised in much of the market narrative, these are both tips of icebergs. There could be 2 or 3 calls for every reported call; and the same for every put. A very simple example... Warren Buffet talks about the huge "crash puts" that Berkshire sold after 2008. These were never anywhere in any exchange numbers.

And this is before you encounter the tidal waves of options exposure that banks can generate hedging their "exotics" exposures. Including but not limited to the popularity of autocallable structures in Asia, and that of cliquet structures in Europe. These create hedging problems that can do weird things to vanilla options exposures, that are frequent but not really representative of any "normal" options-related exposure.

The bottom line is that no bank ever wants an option book that is out-of-balance on any of its Greeks. Whenever this might appear out of balance from a visible source, this is probably just a sexy "flash of ankle" of exposures that cannot be seen elsewhere.

Sorry to be the bearer of bad tidings here.

  • $\begingroup$ I totally agree with you. That said, I wonder if the net option demand, after aggregation by dealers, mostly end up hitting the exchanges. $\endgroup$ Feb 4, 2021 at 9:32

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