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>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".
>
>
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