Today I decided to conduct a study in open interest and the results are intriguing.

Test period: 1/6/20-3/13/20 (encompasses a wide range of market conditions/volatility.)
Instrument: SPX

Protocol: Identify the strike in the nearest expiration with the highest cumulative put and call open interest. Record next day close-to-close percent change in SPX.

Results: Up until 2/21 the results favored trading away from the strike with the greatest open interest, but once volatility exploded the results began to strongly favor trading towards this strike. Another interesting observation: throughout the entire test period Monday and Friday displayed the highest likelihood to trade towards the strike with the most open interest.

Opinions? Insights?

Please share!
-Zimmer

Could you say that it's generally the case that the spread on high OI strikes is narrower?

suko 

Could you say that it's generally the case that the spread on high OI strikes is narrower?

I believe that is true in most cases.

I must confess that I tend to fixate on the strikes with OI for the reason that the spread is often doable.

Recently I have also developed a degenerate fetish for abnormal interest strikes very far out of the money. Recent champ in this regard is esp. the TSLA JAN 2020 5, which sometimes has a decently narrow spread.