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Bryant, if we apply the question of what do I think of this
type of analysis regarding timing using P/C ratios then I have to say that
sometimes it works and others it misses. The general notion is they are
wrong in the trend and right at the reversals...sometimes. The OEX P/C
used to work until its options became more of an insurance item so the ratios
did not reflect the public sentiment. People like John Bollenger and Larry
McMillan use the CBOE equity and equity + index ratios. I stopped
collecting data on the OEX options because the charts just did not appear
useful. Another ratio you might look into is called the Hines Ratio.
That uses volume and open interest rather than just volume. A third
approach uses dollar value of OEX options rather than the actual volume
numbers. Bob Carver at Market clues updates it every 15 minutes.
Borsellino at TradingMarkets.com and now has his own site initially had it but
the time stamp and data were grossly wrong. Don't know if its been
corrected yet. Tom Demark and son discuss a $P/$C modified with open
interest in their book, "DayTrading Options". You might be able to create
it yourself in realtime depending on your data feed and software. I've
been doing it for a few weeks now with the DTN feed. I take the four
option exchanges and calculate the individual and total $Calls and $puts, make
ratios for each and also for the totals. The first few minutes of the day
are rather noisy and then the ratios establish trend. If a sharp change in
the ratios occurs, then the index follows a bit later. I am not
convinced that end of day ratios are that useful since they can change so
radically during the day, although BobCarver's numbers seem to work reasonably
well. When $C/$P<=0.5 a low is nearby. When $C/$P>2 then a top
is near. His ratio closed Friday at 0.68 and Thursday at 0.5. That
tick up might be a clue for Monday turning up from such an oversold level.
Finally, John Bollenger has recommended using a CBOE equity only put volume
ratio. It goes something like, a bottom is at hand within a few days when
the put volume divided by its ten day average is >=2. The sentiment
indicated by the ratios is like an environmental condition and is best used with
a price trend(bands or channels) and price oscillator combination to increase
the odds of the trade. The attached chart shows the predicament of using a
form of sentiment as a timing tool for the OEX. Sometimes its deadly and
even leading. Other times like now it is screaming buy me but the index
keeps dropping. That is telling you something. When the indicators
fail to work something bigger is at hand. At the moment, there is no
question in my mind that there is a gonzo move about to occur.
Unfortunately emotions can get even more negative precipitating more selling and
downward movement in the price channel. If the OEX were cycling sideways,
then the oscillator might be more applicable, but its cycling in a downward
channel. So the mode continues to be sell the rallies. This is of
course ignoring the recent improvement in the McClellan oscillator which by one
measure of making trendline breaks has generated a buy in oversold
conditions.
bobr
----- Original Message -----
<BLOCKQUOTE dir=ltr
style="BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-RIGHT: 0px">
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
<A href="mailto:bulldog5@xxxxxxxxxxxxxx";
title=bulldog5@xxxxxxxxxxxxxx>B.Tharp
To: <A
href="mailto:bobrabcd@xxxxxxxxxxxxx"; title=bobrabcd@xxxxxxxxxxxxx>BobR
Sent: Saturday, March 03, 2001 6:08
PM
Subject: Correct Question
Bob
I am sorry ,Though I did appreciate your response , It was not what I had
thought I sent you I was coping and pasting and some how I screwed up . If you
still wish to give me a response great , again the bottom gif is a blown up
picture of the top The charts are not current and were obtained at the NYC
online trader gathering last year . Oh well of mice and men again sorry for
the confusion .
Bryant
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----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
<A href="mailto:bobrabcd@xxxxxxxxxxxxx";
title=bobrabcd@xxxxxxxxxxxxx>BobR
To: <A
href="mailto:bulldog5@xxxxxxxxxxxxxx";
title=bulldog5@xxxxxxxxxxxxxx>B.Tharp
Sent: Saturday, March 03, 2001 4:01
PM
Subject: Re: Question
Oh, I have a long winded answer and will post
shortly. It might surprise you that I take the question as a serious
one and not a trivolity of humor.
bobr
<BLOCKQUOTE
style="BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-RIGHT: 0px">
----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
<A href="mailto:bulldog5@xxxxxxxxxxxxxx";
title=bulldog5@xxxxxxxxxxxxxx>B.Tharp
To: <A
href="mailto:bobrabcd@xxxxxxxxxxxxx"; title=bobrabcd@xxxxxxxxxxxxx>BobR
Sent: Saturday, March 03, 2001 12:37
PM
Subject: Question
I don't know if you care to comment on this type of anylisis
,but I wanted your insight . I came across this a while back .
I found it again and wondered if it held up in today's market . If this is
to much trouble fee free to take a pass .
It seems interesting . If you think it is worth the time of the
group feel free to post answer
Thanks
Bryant Tharp
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