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Stan,
What is your interpretation now ? It seems that the trend is down since
April.
Do you follow Dow theory at all ? I also noticed that the Dow Ind/ Dow
Transports is in a sharp decline. Does this meaning anything ? Most of
this stuff is new to me and I just started tracking it, but I am not sure
what to make of some of the trends.
Thanks,
Charlie
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> From: Stan Rubenstein <stansan@xxxxxxx>
> To: chipa@xxxxxxxxxxxxxxx
> Cc: metastock-list@xxxxxxxxxxxxx
> Subject: Re: Put-Call Ratio
> Date: Wednesday, October 22, 1997 6:03 PM
>
> I trade Options and think I have something worth adding to this
> discussion.
> Since 1987 and increasingly since Fosback's book the uses of Puts and
Calls
> has become more complicated than simply assuming that Puts denotes
negative
> market expectations (vice versa for Calls).
>
> Styles of investment/trading these days view options as risk management
> tools and positions are taken not as the buyers expectations but as the
> buyer's insurance in case his real expectations don't turn out.
> For example:
> Buying puts for many is not an expectation of a downturn but the back
> side of a trade in a portfolio of stocks or index futures where the
> expectation is a
> market movement up. The Puts are taken on as a hedge or low cost
insurance.
>
> So I find Put/Call ratio not easily interpreted, but the real value in
> watching it may be when the trend or basing of the ratio, e.g. .9,
rapidly
> becomes higher, 1.5, or lower,.45. At which time the ratio is an Alert
> signal requiring
> further research in other indicators.
>
> Hope there are other comments out there.
>
> Stan Rubenstein
>
> At 04:36 PM 10/19/97 -0700, you wrote:
> >From "Stock Market Logic" 1993 by Norman G. Fosback:
> >
> >"Option traders lose money on balance. Their judgements of the
> >direction of individual common stock prices, and of the market as a
> >whole, are usually wrong. Therefore, a high Put/Call Ratio (a large
> >volume of puts relative to calls) usually precedes a period of rising
> >prices, not falling prices as the option speculators would prefer.
> >Conversely, a low Put/Call Ratio (indicating relatively little put
> >buying activity and greater call buying activity) is invariably
> >followed by declining prices instead of rising prices as the
> >preponderance of option buyers desire." - p.89
> >
> >Fosback's book is full of interesting indicators and indicator
> >theories. My 1993 copy is getting a little long in the tooth though
> >and I don't know if he has updated it since then. Even so, there is
> >lots of interesting information to think about in the book. If anyone
> >is interested, here is the ISBN: 0-79310-148-4
> >
> >Chip
> >
> >---"Charles F. Corbit III" wrote:
> >>
> >> Thanks Harvey,
> >>
> >> That was me who asked. I just started to download alot of the "not so
> >> common" indices from DialData and they only give you a name, but no
> >real
> >> indication of what they consist of.
> >>
> >> Anybody happen to us Put/Call ratio or the other option based
> >indicators as
> >> a primary indicator or as a confirmation ? I am still real new to
> >this and
> >> would like to hear any comments or how theses indicators can be
> >> interpreted.
> >>
> >> TIA,
> >>
> >> Charlie
> >>
> >> ----------
> >> > From: Harvey Pearce <hpearce@xxxxxxx>
> >> > To: metastock-list@xxxxxxxxxxxxx
> >> > Subject: Put-Call Ratio
> >> > Date: Sunday, October 19, 1997 5:46 PM
> >> >
> >> > There was a question yesterday concerning the put-call ratio. Since
> >> > I've seen no other answers I'll chip in. Sorry I've mislaid the
> >> > original message.
> >> >
> >> > >From "Options as a Strategic Investment" by Lawrence McMillan -
> >3rd.
> >> > edition, 1993.
> >> > "The put-call ratio is simply the number of puts traded divided by
> >the
> >> > number of calls traded. It can be computed daily, weekly, or over
> >any
> >> > other time period. It can be computed for stock options, index
> >options,
> >> > or futures options. Sometimes it is computed using open interest
> >> > instead of volume. If it is calculated daily, one usually averages
> >> > several days worth of figures to smooth out the fluctuations."
> >> >
> >> > Under the heading of More Than You Wanted to Know: from "Winning
> >on Wall
> >> > Street" by Martin Zweig - 1990. "It was shortly after finishing my
> >> > dissertation that I invented the puts/calls ratio". ... "It was
> >> > gratifying to be right again, and it made me even more eager to
> >write
> >> > another article. The next one was on the puts/calls ratio, to
> >which I
> >> > referred previously. This came out in the spring of 1971, when that
> >> > indicator had just turned bearish. For the next seven months the
> >market
> >> > went down, and again I had hit the nail on the head".
> >>
> >>
> >
> >_____________________________________________________________________
> >Sent by Yahoo! Mail - http://mail.yahoo.com
> >
> >
> >
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