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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: edamo who wrote (4948)	3/14/2000 11:28:00 AM
From: Seldom_Blue	Read Replies (1) \| Respond to of 8096

only way a ratio can be deemed neutral is if 1:1.....excessive number of puts versus calls is strong indication of sentiment and trend reversal... what you haven't considered is that the derivitives at some point in time must be converted into the tangible underlying... Ed, can you expand on that a bit? I am interested to hear how you use put/call ratio. When you select a particular strike price, do you look at the put/call ratio at that strike? I have not read much on this subject that makes sense to me yet. Regarding converting into the underlying. I think there is a trend, using myself and a couple of boards as barometer, in trading options only and closing them out. I have seen a lot of stock traders turning into option traders. I do not know the percentage of the people who trade only options and not taking security, but it seems to be a big percentage. Interested in hearing your thoughts on it. Seldom Blue

To: edamo who wrote (4948)	3/14/2000 11:40:00 AM
From: Seeker of Truth	Read Replies (1) \| Respond to of 8096

At the time when the derivatives are converted into the real thing, the put buyers are selling the stock, the put sellers are buying the stock. Similarly the call buyers are buying the stock and the call sellers must sell the stock. What's not neutral about that? Both are neutral and the ratio is neutral. What's the difference between these two cases? Case I 100 put owners sell the stock. 100 who sold puts buy the stock. 5 call owners buy the stock. 5 who sold calls sell the stock. Case II 5 put owners sell the stock, 5 who sold puts buy. the stock. 100 call owners buy the stock, 100 who sold calls sell the stock. There's no difference! Assuming for simplicity that everybody had bought or sold one contract, in both cases 10,500 shares are bought and 10,500 shares are sold. There are always as many buyers as sellers. QED