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Norman, thanks for the lyric. The data I have isn't adjusted for interest
rates. Its just what comes over the DTN feed. This $C/$P alternative is
just for the OEX and it also is dead neutral after the fed cut.
bobr
----- Original Message -----
From: "Norman Winski" <nwinski@xxxxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Tuesday, May 15, 2001 12:10 PM
Subject: Re: [RT] Mkt - general
>
> ----- Original Message -----
> From: "BobR" <bobrabcd@xxxxxxxxxxxxx>
> To: <realtraders@xxxxxxxxxxxxxxx>
> Sent: Tuesday, May 15, 2001 10:32 AM
> Subject: [RT] Mkt - general
>
>
> > Wow, the sentiment towards stocks with options traded at the cboe are
> quite
> > bearish with their $c/($c+$P) having dropped to what is often a contrary
> buy
> > level.
> >
> > bobr,
>
> My volume related option sentiment numbers are just about dead neutral.
> Since the indicator you are looking at is price related, the put call
> relationship is greatly influenced by interest rates, is there
> any adjustment for an anticipated interest rate move in this data?
>
> Here is why. Lower interest rates make the short stock conversion less
> desirable, i.e. part of the equation for conversions is that the money
that
> market makers are paid on their short stock balances, which is a
percentage
> of the stock loan "box". (If you are a big stock trader and have short
stock
> positions, you should be getting some of ths juice too. The brokerage
houses
> rip off the public by keeping all of this money and then have the chutzpah
> to charge the customers interest on a position on which the house is
making
> money.) . As interests drop, this short stock rebate amount shrinks and
> means market makers will pay less for calls and need to receive more for
the
> put premiums they write. This means there should be a shift in relative
> premiums in favor of puts over calls. This is also true from the point of
> view of the long stock position, as the cost of carry will drop therefore
> making a lower call premium balance the equation. Keep in mind the
opposite
> during rising interest rates.
>
> Thanks for bringing this to my attention.
>
> Here is a parodical piece of apropos song lyric for the occasion:
>
> Delta Dawn, what's that spread you got on
> could it be a position from days gone by?
> And did I hear you say, you'll be taking it off today
> and headin' for that clearing firm in the sky?
>
>
> Delta-ingly,
>
> Norman
>
>
>
>
>
> >
> > To unsubscribe from this group, send an email to:
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> >
> >
> >
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> >
> >
>
>
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