One of the off-the-radar things we watch is the length of time various subsets of options are held. The flip side of that is the turnover rate of those options. Several years ago I put out a white paper on the concept, and about a year ago there was a small WSJ piece. There is evidence; it's not anecdotal.

The general gist is that those who are more conscious of attuning their options positions (i.e. greater turnover) tend to be correct. Conversely, those who are complacent tend to pay for their complacency. Whoever is longest in a position tends to be "wrongest". As of this evening it is the holders of call equity options who are the more complacent.

One beautiful thing about this indicator is that it appears to measure portfolio shifts rather than mere trading shifts. That is, there isn't much fluttering back and forth.

Disclosure: we have been out of our longs for about 2 months (on the strength of other indicators) and we don't ever short equities.





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