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Strategies & Market Trends : MDA - Market Direction Analysis

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Nov 19 4:00 PM EST

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To: StockOperator who wrote (12400)	4/29/1999 12:47:00 PM
From: pater tenebrarum	Read Replies (1) of 99985

SO, you do indeed sometimes see wild swings in positioning in the options market. the signals have to be interpreted on a case-by-case basis when it comes to individual issues or sectors. the rule of thumb is that the majority of options traders is usually wrong. there are exceptions though, if for instance there is a sudden build-up of call positions in a stock that's been doing nothing with no news to explain it, it's usually insiders making a play. if you see options traders react strongly on unforeseen news(whether good or bad) it is usually safe to bet against them. in the case of the cyclicals, my take would be to wait for them to show some conviction that the move is for real by increasing their call buying and ideally a concomitant decrease in put open interest. then it would probably be safe to short the group. of course this should be used in conjunction with other technical indicators, to either confirm what they are telling you or raise a note of caution. regards, hb

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