Predictive Strength
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Predictive Strength
Aggregate Open Interest aggregates and standardizes open interest data across leading global exchanges, including futures, options, and perpetual swaps, offering insight into liquidity trends.
Aggregate OI acts as a real-time ledger of global speculative capital entering/leaving derivatives markets. Sustained increases signal institutional-grade liquidity injections. This metric filters out noise from isolated exchange anomalies, revealing cross-platform consensus about trend conviction.
Extreme OI levels (2+ standard deviations above mean) historically precede volatility spikes. The March 2024 BTC drawdown saw OI drop 22% alongside price, flushing overleveraged positions – a reset that enabled April's rebound. Monitoring aggregate OI helps identify overheated markets before forced liquidations cascade.
Open Interest (Aggregate) data is sourced by aggregating raw open interest values from leading exchanges, converting all positions to a standardized USD notional value (including futures, options, and perpetual swaps). This involves normalizing the data relative to historical averages, where a value of 1 indicates higher-than-average liquidity and 0 represents lower-than-average levels.
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To understand a predictive factors predictive power, we create a simple long/short strategy and simulate its past performance (with daily rebalancing):
The strategy is rebalanced daily, on a continuous basis. There are 0.5% transaction costs applied on each position adjustment.
Get started by validating the historical performance of the strategy with our transparent code snippets.
Copy and paste the code snippets below into your Python environment or download the files below.
Predictive Strength
Predictive Strength