The Opening Pressure Signal
Opening Pressure is a statistical measure of institutional directional conviction in the options market. It captures the imbalance between OTM call and put buying in large-block institutional orders, then uses that imbalance to rank tickers by expected next-session direction.
The Core Intuition
When informed institutional participants expect a stock to move significantly, they express that view through the options market — and the way they do it leaves observable fingerprints. The Opening Pressure signal identifies these fingerprints by isolating a specific subset of institutional-scale options flow that carries high directional conviction.
The signal applies a proprietary combination of filters to distinguish genuine directional positioning from routine hedging, income generation, and retail speculation. These filters target:
- Orders that reflect conviction about future price direction, not hedging or income
- Position sizes that indicate institutional — not retail — participation
- Time horizons consistent with informed forward-looking positioning
- Trade initiation direction (buyer vs. seller) classified at NBBO
The signal normalizes the directional imbalance into a score from -1 (strong bearish institutional pressure) to +1 (strong bullish institutional pressure) per ticker. Tickers are then ranked to form a long/short portfolio.
Signal Construction
The signal is a normalized ratio of institutional bullish pressure to bearish pressure, computed per-ticker each trading session. It produces a score between -1 and +1.
The exact filter parameters — moneyness thresholds, contract size minimums, expiration windows, and directional classification rules — are proprietary. They were selected through a rigorous multi-stage validation process, not arbitrary judgment.
Tickers with non-zero signal are ranked by value. The top tickers form the long portfolio; the bottom tickers form the short portfolio. The portfolio is reconstituted each session.
What the Filters Target
The proprietary filter combination was designed to isolate institutional conviction from the noise of routine market activity. At a high level, the filters separate:
Conviction from hedging
Most large institutional options trades are hedges — portfolio protection, collar adjustments, rebalancing. The signal filters these out to focus on trades that represent a genuine directional thesis.
Institutional from retail
Retail options flow is noisy and often contrarian. The signal applies size and structure filters that restrict the universe to participants deploying meaningful capital with research behind it.
Forward-looking from tactical
Short-dated options activity is dominated by intraday speculation and gamma scalping. The signal focuses on positioning with enough time horizon to reflect informed expectations about future price movement.
Initiated direction
Every trade is classified by whether the buyer or seller initiated it, using NBBO at the time of execution. This directional classification is the foundation of the pressure measurement.
The full signal specification — including exact thresholds — is available to Pro subscribers through the API and dashboard. The live portfolio is published daily at GET /strategy/today.
Execution Pipeline
The signal runs on a close-to-close return measurement framework:
~11 PM ET, Day T
Materialize
After the nightly abnormal trades download completes, the signal is computed for session T. Portfolio longs and shorts are determined and closing prices for session T are fetched. Session record persisted to /data/processed/strategy_opening_pressure/.
4:35 PM ET, Day T+1
Finalize
Closing prices for the holding day (T+1) are fetched. 1-day returns are computed per ticker: ret_1d = (close_T+1 − close_T) / close_T. Session record updated with realized returns. Long/short leg performance, SPY benchmark, and aggregate daily Sharpe/drawdown metrics are updated.
Validation Results
Opening Pressure is part of a broader family of signals tested in the Pan & Poteshman replication study. Multiple signal configurations were tested through a three-stage validation framework. Only a handful survived the full out-of-sample holdout:
188.5M
Orders in dataset
1,250
Sessions
3
Validation stages
1.81
OOS Sharpe (best)
Three-stage validation structure
Key finding: the two strongest IS1/IS2 performers both failed OOS — demonstrating that in-sample ranking alone is insufficient and multi-stage gating is necessary.
Accessing the Signal via API
GET /strategy/today
Returns the current session's Opening Pressure portfolio — 30 long and 30 short tickers, ranked by signal score, with live intraday prices.
GET /strategy/session/{date}
Historical session record for any past date — portfolio composition, signal values, and finalized close-to-close returns.
GET /strategy/performance
Aggregate performance time-series: daily L/S returns, cumulative return, Sharpe ratio, max drawdown, beta, and friction analysis across cost tiers.
GET /strategy/health
Session count, signal name, date of last materialization. No auth required — safe for health checks and monitoring.
Use the signal
Strategy portfolio endpoint is available on Pro. Full API documentation at /developers.