Hanweck Introduces Volume Weighted Relative Liquidity Measure
Posted: 7 June 2018 | Source: Hanweck
Hanweck, a leading provider of real-time risk analytics on global derivatives markets and data provider for the Options Liquidity Matrix, introduced its new Volume Weighted Relative Liquidity (VWRL) measure. The Hanweck VWRL metric measures bid-ask spread as a percentage of option mid-point price. The measure normalizes metrics for different priced options, and places greater weight on those spreads with greater trading volume. The result is a metric that better reflects the true liquidity and spreads of a given options class.
Robert Levy, Hanweck Head of Business Development, said, “For many years, we have drawn on our vast database of historical options data to produce the Options Liquidity Matrix. More recently, we have begun exploring new liquidity measures that build on this data and incorporate more sophisticated quantitative techniques. The VWRL, as well as a related vega-weighted liquidity measure focused on volatility as an asset class, are the result of those efforts and we are pleased to make these proprietary metrics available to our customer base.”
The VWRL was featured in a recent Hanweck analysis surrounding liquidity on February 5, 2018, and due to subsequent demand, is now available on a subscription basis.
The VWRL is an addition to Hanweck’s existing suite of market quality metrics, which includes:
- Average Bid/Offer Size: Average of the sum of the bid and the offer size across all quotes.
- Average Bid/Offer Spread: Weighted average of the bid/offer spread across all quotes, where weights are the sum of bid and offer size for each quote.
- Average Trade Size: For all reported trades, the total number of contracts executed divided by total number of trades.
- Average Trade Value: For all reported trades, the execution price multiplied by the number of contracts divided by the total number of trades reported.
- % Executed at Bid/Offer: Percentage of reported trades executed at the prevailing bid/offer.
- % of Time @ Best Bid/Offer: Sum of time the exchange is both best bid and best offer (across only symbols quoted by the exchange) divided by the sum of time those symbols have a best bid/offer during the trading day.
- % of Time @ Best Bid/Offer with Greatest Size: Sum of time the exchange is both best bid and best offer and the quote has both greatest bid size and greatest offer size (across only symbols quoted by the exchange) divided by the sum of time those symbols have a best bid/offer during the trading day.
- Penny Options Statistics: Includes options in underlying symbols in the Penny Pilot program.
- Securities Traded: The number of individual unique option symbols traded during the period.