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Sent: Thursday, July 31, 1997 4:20 PM
To:
First of all I know most people only want to look at this as a vehicle and
determine if it can make them money. It was not my intent to just create
something for the group to specifically make money, but to prove that options
are imperfect but often valuable tools in determining overbought/oversold
conditions in the market.
I think I have shown objectively and subjectively that the OEX put divided
by call ratio (as well as other options) is a good tool to use to assist buy
and sells. Even without optimizing the net gains by my simple initial rules
are great:
1) When OEX (S&P 100 Index) Put Volume / Call Vol' is 1.54 or greater it is a
Buy on open the next day. And when this P/C ratio is .99 or less then a Sell
on open the next day. These are end of day readings and using just one day
(no moving avg.).
2) The signals last for 2 days with an exit on the open exactly 2 days after
entry.
Stopping right here one could have still made a very good return.
#'s 1 & 2 are the core rules from which money management can now come in.
I suggested some obvious but more general rules.
Don't take a Sell after a large down day (around ? 1% or so), and don't take
a Buy when prior day was already up big (1 % or so ?...) . Also for the RT
group I didn't take multiple signals on consecutive days (that has added a net
36+ points over the last 1.5 years to total). This would also greatly reduce
the # of trades yet increase the profit.
Not mentioned are also some obvious rules that each can refine for himself;
perhaps a 10 point stop could add about 73 points to 1.5 year record and using
a two-thirds retracement profit stop after a 1% + profit could add another 37
points. The recent 85 to 90 % accuracy over the past few months was without
these later rules; though 85 to 90 % is hard to maintain with any system. The
good news is that the 6 wins and 1 loss record of the past 2 months has not
been in hindsight, but with clear notification of rules with supporting
signals to review.
Anyway there is a net gain potential of 300 to 400 points basis the S&P
futures based upon these and related rules over the past 1.5 years since
12-95 ; and actually this is with 2 months of missing data that I'm confident
would boost the record.
Again this is not my main trading mechanism and it is the most simple of all
the tools I use, and it's not the rocket science of other claimed/famed
systems, but it does work and appears to work better than many. Although I
guess hardly anyone has offered much in the way of a system to this group
ever. Sometimes there will be a date mentioned for a turn but almost always
it is a couple days after the turn that the prognosticator tells us which way
you should have played the turn. I'm just trying to encourage people to
give some systems (even someone elses sys' like Connors book of systems) or
signals or specific predictions and then follow thru with the results. Give
out some rules and or the actual signal and then sometime after each signal
expires review what others could have or should have done with your knowledge
that was given with 'foresight'. If one does't have a sys' but just a turn
then post the night before or even the morning of the turn which way you
interpret the future direction.
And since I started this diatribe I will just add that it does absolutely no
good to the group to tell RT'ers how great youare and how you have 80 to 100%
accuracy and are better than others with acrimonious epithets (this should
bring to mind 2 people from this past week to most of us), with no helpful
rules or signals or ideas given out.
Sorry for the tangent ! Back to the OEX P/C to wrap up.
Data is easy to come by. Wall St. Journal, New York Times.. and many
electronic vendors carry the OEX and other option numbers.
My personal system I use mostly is far more selective and incorporates 10
other indicators than what I have shown above.
Sometimes simple is best !
Godd Luck to all,
Kurt
Sunnen@xxxxxxx
PS: By the way while the OEX sys' is flat did anyone notice that the CBOE
and all listed option P/C ratios were at record lows on the close 7-30. Thus
it may have signaled the weakness today. Friday ??? Who knows.
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