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OK .. thx for the comments - I'll look at index volume..
-----Original Message-----
From: The Funkhousers [mailto:funkhouser@xxxxxxxx]
Sent: Wednesday, November 07, 2007 4:53 PM
To: Chris Evans
Cc: Omega List
Subject: Re: Volume Question
Another view on your question regarding volume, but it requires a bit of
background.
First we need to acknowledge that we are basically trading a derivative
of an actual item -- the index.
Secondly, while there will be periodic variances between the actual
price changes in the index and its derivative they will over reasonable
time frames respond similarly. While the demand/supply for the
derivative will cause variances in the premium values included in the
derivative, the actual change in the index will be the dominant force in
determining the price trend of the derivative.
In fact the volume of trading behind the index is a more important
factor in determining the future price of both the index and its
derivative, than is the volume of trading in the derivitive. The
supply/demand balance for the derivative principally affects only the
premium component of the derivative.
If you buy my argument, and I do use this idea myself, then plot the
derivative prices on your chart, but pair it with the volume of trading
in the index itself. And if you are of the opinion that changes in the
premium included in the derivative gives you other clues to possible
future price movement, those values changes can also be charted
separately, if your program and data base permit.
Richard Funkhouser
Chris Evans wrote:
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