OI Skew

OI skew measures the imbalance between call open interest and put open interest across an options chain. Unlike the put/call ratio which measures daily trading volume, OI skew reflects the cumulative positioning of all market participants — it shows where capital is actually committed, not just where activity occurred on a given day. A positive OI skew (more call OI than put OI) suggests the market is positioned for upside, while a negative skew (more put OI) suggests defensive positioning or bearish expectations.

The value of OI skew lies in its stickiness. Volume can spike on any given day due to hedging, speculation, or even algorithmic noise, but open interest represents actual positions that traders are holding overnight and beyond. Large institutional investors typically don't flip positions daily — when they build significant call or put exposure, it tends to persist for days or weeks. This makes OI skew a more reliable indicator of institutional sentiment than daily volume metrics.

Interpreting OI skew requires context. A stock might show heavy put open interest not because traders are bearish, but because institutions are hedging long stock positions or writing cash-secured puts to enter positions at lower prices. Similarly, elevated call OI might reflect covered call strategies rather than bullish speculation. The most meaningful signals come from changes in OI skew — a rapid build-up of call OI over several days indicates fresh bullish positioning that wasn't there before.

Options Pilot tracks OI skew as part of the Sentiment pillar, monitoring both the absolute skew ratio and its 5-day trend. The system distinguishes between skew driven by near-term options (which may reflect event positioning) versus skew in longer-dated contracts (which suggests conviction about sustained directional moves). This multi-timeframe analysis helps separate noise from genuine shifts in market positioning.