Microprice Drift and the Theta Wall: Why Order-Book Depth Cannot Time Option Execution
Posted option depth carries real short-horizon information and still cannot be monetised — the toll is flat in horizon while the move grows with √t.
Controlled IC 0.104 (t 66.9) at one hour, against a round-trip toll flat across horizons: $2.36 at 1h, $2.37 at 9d.
Posted option depth imbalance carries real, control-surviving short-horizon information — and cannot be monetised, by a strategy or even as an execution timer. Three measured mechanisms explain why: microprice mechanics, a toll that is flat in horizon, and the theta wall.
Waiting an hour to sell forfeits roughly $1.2 per contract of decay against a $0.4 depth tilt. The information is real. The clock eats it.
What’s in the repo
Extraction scripts for the bid/ask size fields most pipelines drop, the signal-agnostic oracle bound and horizon gradient, the within-snapshot controlled IC with a shuffle null, the theta-wall test on the tradeable side, and a complementary print-signing null. Three pre-registrations ship verbatim, plus the signed-flow addendum.
Reproducibility
Not runnable as shipped: the tests need licensed CBOE chains including bid/ask size. Published for audit. The Gate-0 bound needs only a quote panel.