Option-to-Stock Volume Ratio
NO EDGEUnusually heavy options trading relative to underlying-share trading can reveal negative private information when stock shorting is costly. The signal does not require classifying option trades as buys or sells.
| THE STRATEGY | $SPX BUY & HOLD | |
|---|---|---|
| Growth a year (CAGR) | 5.3% | 11.9% |
| Return per unit of risk (Sharpe) | 0.39 | 0.84 |
| Worst fall (max drawdown) | -32.8% | -24.8% |
// GROWTH OF $1, LOG SCALE
Tested on years it never saw (from the split): 5.4% a year against 12.4% for the benchmark; Sharpe -- in the training years, 0.39 after.
After 25 bps of trading costs: 1.7% a year. WITHIN RANDOM
// DECADE BY DECADE
| ERA | STRATEGY | BENCHMARK |
|---|---|---|
| 2010s | 9.1% | 9.3% |
| 2020s | 2.1% | 14.1% |
// THE IDEA, AS PUBLISHED
Travis L. Johnson & Eric C. So (2012), The Option to Stock Volume Ratio and Future Returns, Journal of Financial Economics · 2012
- Weekly O/S = total option contract volume / share volume for each optionable stock
- Sort into deciles by O/S
- Long the lowest-O/S decile, short the highest
- Hold one week, then re-sort
A real computation on the QuantGPT warehouse, survivorship-free, walk-forward. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-09-24 19:42 ON THE QUANTGPT WAREHOUSE: EVERY DELISTED NAME KEPT, FUNDAMENTALS AS FILED. NOT INVESTMENT ADVICE.