Hanweck introduces volume weighted relative liquidity measure

Hanweck introduced its new Volume Weighted Relative Liquidity (VWRL) measure. The metric measures bid-ask spread as a percentage of option mid-point price. It 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.

The VWRL is an addition to Hanweck’s existing suite of market quality metrics, which include:

  • 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.

Read the full release

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