LG, and all,
I really dont follow PUT to CALL ratios that much, but just out of interest I was looking at the OPEN INTEREST in the OEX OPTIONS.
My thought is that it is the BIG BOYS who do most of the selling of the PUTS and CALLS, so it would benefit them the most to have as many of the PUTS and CALLS to expire worthless. Based on that I tried to analyze the OPEN INTEREST of both PUTs to CALLs to see at what level would there be equilibrium, which would imply that arbitrage may be minimized as we approach option expiration.
All I did was add 4-5 sequential strikeprices on both the PUTs and CALLs and when they were about equal for both the PUTs and CALLs, then I concluded that such price would be the best for the OEX to close at expiration. Of course this is based on Fridays figures and will change daily. Is this logic viable, please comment.
From this process, I concluded that equilibrium between the PUTS and CALLS would be achieved with the OEX above 485 and below 490. I also did it for the DJX, but the DJX has much less volume in total, nevertheless, I concluded equilibrium below 8000 and above 7900. So based on Fridays figures, if the OEX was to drop below 485 there would be more PUTs in the money than CALLs and if it rose above 490 there would be more CALLS in the money than PUTs.
Am I making any sense. Since I am still learning to understand the options better, would appreciate any comments.
Seeya |
