Our approach to seeing the alpha offered by option analysis is very different to chasing the secondary option Greeks; Gamma, Vanna and Charm. These secondary Greeks are only the result of OI changes, they don't offer early indications of changing sentiment.

In commodities and their ETFs, these secondary Greek effects aren't as significant, this is due to the markets being much bigger than the option hedging effect. We see OI changes as a much more important predictive indicator, as it shows the footprints of traders' sentiment. In gold, for example, the market is much larger than the option hedging requirements, therefore positional changes may take many weeks for price discovery to follow.

NakedDelta exists so that a well-trained option trader utilising this product will be able to achieve the following:

• Surmising why OI and DPI changes are made, and the effects they might cause
• How technical analysis adds to the summation
• How macro-economic data supports these NakedDelta's data and the trader summation

This makes NakedDelta another strong indicator that may or may not support your confirmation bias.

We describe long-term option positioning as either Long, Neutral or Short. The OI in Long markets has strong 100 to 80 delta OI in calls deep ITM (in the money) positions, busy delta hedging ATM (at the money), and strong call positions OTM (out of the money) 30 to 10 delta. Put OI changes during the period of a long market around delta hedging requirements, though the base positioning includes ATM to OTM puts, usually in a 1:1 ratio to the call OI. Participants' individual risk management and short term market fluctuations are strong indicators of technical analysis and upcoming macro-data events. Long positioning is associated with strong gains in price.

Short-term OI is the inverse of Long positioning, with the strength in high delta puts.

Neutral OI positioning doesn't have clear strength in call or put OI. It doesn't lean to the Long or Short side of option deltas and often has a lot less OI. Neutral positioning in a security tends to respond with its industry, its commodity and market direction. It will also respond to daily, or short-term changes in OI that aren't seen in long-term positioning. Neutral OI can be the start of a change in direction of overall positioning as more participants come on board.