The EV method description states the following weakness:

"A second weakness is that the Effective Volume method does not take into account parallel trading activities such as ETFs and options. It is indeed possible that a large fund takes a long position in options while shorting the stock, trying to profit from the difference in volatility. This would show up as a downward pressure on the Effective Volume pattern, while in reality the move should have been neutral. The solution is to look at longer time frames (40 days accumulation patterns in Effective Volume) or to compare moves on others stocks in the same sector."

Would I be correct to assume that it's the largest cap stocks in which opposite positions (using options) are taken by large funds who require sufficient liquidity to create these offsetting positions? If that is indeed the case, does it mean that EV analysis would be more accurate using smaller cap stocks (tho still large enough for big money to be interested in)?

Trader D