Concentration-Clustering-Position Size

Measuring the traders’ sentiment is function of two variables:

1. Concentration
2. Clustering

With concentration we measure the size of a position as a percentage of total open interest (positioning risk), with clustering we measure the number of traders holding a specific position as a percentage of the total number of traders (sentiment) and with position size we measure the average level of conviction using the size of position held by the number of traders. We are assuming traders are holding the same position size, it might not be very accurate but gives us a clue about conviction.