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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: brightness00 who wrote (80601)6/18/2002 3:39:58 PM
From: mishedlo  Read Replies (2) of 99280
 
Statisticly speaking, the profit takers on puts are the writers. The really strong hands do not need to buy back in order to lock in profit on puts that they write; they make money when writing, and then wait for expiration

While that may be true more or less, I do not see how it fits into the PC ratio theory. The PC ratio theory suggests that when the PC ratio is high there is fear and prople are buying puts and therefore we rally.

I believe the fact that when people buy puts that there is some merit to the theory. The problem I have is the PC ratio does not let one know if a position is opened or closed, or just intraday.

On average, I would suggest that when we see a number it is primarily option buys by the public, thus PC can have merit.

But looking at PC ratios in option expiry week in particular, when people are rolling them over to the next month, cashing out to take profits, cashing out to prevent them from going to zero, etc, it is nearly impossible to make heads or tails out of PC ratios during expiry week or just before.

The PC ratio has enough flaws as I have pointed out without these further complications.

The bible so to speak is actual open interest. Impossible to discern how that might be affected merely by looking at a simplistic PC ratio.

Does that make sense?

M
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