Two readings of where the options crowd has already placed capital. Cost tells you what they paid.Strike tells you what they expect.
Every options analytics platform has a version of positioning data. Max pain calculators report the strike where the largest dollar-weighted open interest sits. Put-call ratio aggregates the direction of recent flow. Dark pool and unusual-options-activity feeds publish individual large trades as they cross the tape. These are raw observations of what happened.
The gap is interpretation. Raw flow data answers who traded what. It does not answer whether the crowd is paying up for conviction, harvesting premium, or positioning for a specific move. Phospho's Option Positioning metrics are constructed to answer those questions directly.
How Phospho uses it
Option Positioning is read each day to determine whether the options market supports, contradicts, or is silent on the directional thesis carried by the other pillars behind every Morning Luminary trade idea.
Read The Signals
Two metrics, read together.
When Option Positioning is shown in our intelligence, both metrics are reported for each expiration. Here is how to read each one.
Metric 1
Average Cost per Contract
▲
Higher average cost means open interest is concentrated in more expensive options. Higher implied volatility, deeper in-the-money, or longer-dated expirations.
▼
Lower average cost means open interest is concentrated in cheaper options. Out-of-the-money strikes, lower implied volatility, or near-term expirations.
What it tells you. Whether traders are paying up for protection or conviction, versus taking speculative or premium-harvesting positions.
Metric 2
Average Strike (OI-weighted)
▲
Above current price. Positioning concentrated in higher strikes. Bullish tilt; the crowd is positioned for upside.
—
Near current price. Balanced around the underlying level. Neutral positioning; no strong directional bias.
▼
Below current price. Positioning concentrated in lower strikes. Bearish tilt or downside protection.
How to interpret
Each metric is a lens. Cost answers how much the crowd is paying. Strike answers where the crowd is pointed. Read the pair. A single metric alone rarely provides actionable context.
Neither metric is a prediction. Both are observations of already-committed capital. The crowd can be wrong, and it often is.
Reading Option Positioning with other signals
Positioning is most useful as confirmation or contradiction.
Option Positioning is read against the directional thesis produced by the other pillars. Four patterns illustrate how the signals interact.
Leader + Strike above
A confirmed bullish setup. Structural strength is matched by options-market positioning for upside. Highest-alignment combination for long-side trades.
Leader + Strike below
A contradiction. The stock is outperforming, but the options crowd is positioned for downside or protection. Worth reading the Deep Glow report carefully; either the crowd is wrong or it is ahead of something the other pillars have not yet caught.
High cost + Strike near current
An expected-move setup. Traders paying up for at-the-money options typically signals expectation of a large move without directional consensus. Often precedes earnings, litigation rulings, or scheduled catalysts.
Low cost + Strike below
A speculative downside or premium-harvest profile. Cheap out-of-the-money puts suggest speculation on downside. Read with Leadership and Continuation to distinguish speculation from informed positioning.
These are illustrative patterns. Every Deep Glow report spells out the specific signal combination that mattered for its trade idea.
How it's built
Two weighted averages of open interest data.
Both metrics are open-interest-weighted summaries of the current options book. Each contract outstanding contributes to the average in proportion to how many contracts are open at that strike and price. Contracts with no open interest contribute nothing.
The calculation
For every open contract at every strike, pull open interest, mid-price, and strike
Compute the open-interest-weighted mean contract price per expiration
Compute the open-interest-weighted mean strike per expiration
Compare each to benchmarks: price against historical cost typical, strike against current underlying
Reference glossary
Show
Methodology Reference
Component Glossary
OI
Open interest
Total number of contracts outstanding at a given strike and expiration. Not volume; a snapshot of existing positioning.
MID
Mid-price
Average of the current bid and ask for each contract. Used as the reference cost for weighting.
WAC
Weighted average cost
Sum of (mid-price times open interest) across all strikes, divided by total open interest.
WAS
Weighted average strike
Sum of (strike times open interest) across all contracts, divided by total open interest. Compared to the current underlying price.
Both metrics are computed per expiration. Aggregating across expirations is possible but masks term-structure differences that often matter.
Reading them together
Cost and strike, combined, describe intent.
Each metric reports a single dimension. Read together, they describe what the crowd is paying for and what they expect. Three combinations recur often enough to name.
High cost+ High strike
Paying up for upside. Traders are buying expensive upside calls and willing to pay premium for it. Common in pre-catalyst periods or when directional conviction is high.
Low cost+ Low strike
Cheap downside or premium harvest. Either traders are buying cheap out-of-the-money puts to speculate on downside, or selling calls to harvest premium against a ceiling.
High cost+ Strike near current
Paying for expected magnitude. High implied volatility on at-the-money options suggests the market is pricing a large move without taking a side. Often precedes earnings or other scheduled events.
What these metrics cannot tell you
Limitations stated plainly.
Option Positioning is a snapshot of committed capital. It tells you where the crowd is, not where price is going.
Sensitivities
Dealer hedging. Large blocks traded by options market makers can distort open interest readings that appear to be directional conviction.
Expiration cycles. Monthly and quarterly expirations dominate open interest and can mask activity in weekly chains.
Low-liquidity names. Sparse open interest produces unstable weighted averages that swing on small flow changes.
Boundaries
Crowd accuracy. Positioning data describes consensus, not correctness. The crowd can be wrong.
New flow. The metrics are snapshots of existing open interest, not a real-time read on new trades crossing the tape.
Intent attribution. Positioning does not reveal whether a position is a hedge, a speculation, or a yield trade.
Standalone trade signal. Read these against Leadership, Continuation, and Exhaustion. Positioning alone is rarely enough.