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Strategies & Market Trends : MDA - Market Direction Analysis

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Jan 16 4:00 PM EST

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To: Les H who wrote (42698)	3/10/2000 6:15:00 AM
From: LaVerne E. Olney	Read Replies (1) of 99985

Here's a couple Call-Put Charts (note inverse of Put-Call): Equity Call-Put Ratio (10-day moving average): users.intermediatn.net Hines Ratio - Call-Put TRIN (10-day moving average): users.intermediatn.net Stocks & Commodities V. 10:4 (178-183): SIDEBAR: USING OPTION RATIOS USING OPTION RATIOS To many traders and investors, the limited-risk aspect of the purchase of both call and put ratios is appealing. Many market followers believe that when the major activity is concentrated in either calls (bullish expectations) or puts (bearish expectations), extremes in crowd psychology will appear. An overabundance of optimism usually accompanies a market top, while market bottoms are typified by a preponderance of pessimism. The conventional method for gauging bullish and bearish sentiment in regard to options activity is to keep a ratio of the volume of call options traded compared with the volume of put options traded. Usually a 20-day moving average of this ratio is kept, as the day-to-day reading of this ratio can be very volatile. Call / put ratio = Call volume / Put volume For every buyer of an option, there is a seller (writer) of that option. It will be helpful then to note whether the volume activity is an indication of new buyers being met by new sellers or whether the volume actually represents traders who are liquidating positions. Combining open interest (the amount of outstanding contracts at the end of the trading session) with the call/put ratio of volume provides this additional information. This is called the call/put TRIN: Call volume / Call open interest ---------------------------------------- = Call / put TRIN (Hines Ratio) Put volume / Put open interest Other sentiment charts can still be found at users.intermediatn.net leo

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