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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (5835)	3/14/2002 10:08:19 PM
From: John Pitera	Read Replies (2) \| Respond to of 33421

Hi Tom, I have mentioned a few times over the past 9 months that as we move forward in an extended bear market that the VIX and VXN option volatility levels should find themselves working their way to lower average levels. We may well find that the Market metrics, ratios and averages of 1997 to 2001-2002; will be viewed by in the future to have been statistically "outlier" and non-typical in their levels and behavior. Clearly the PE Ratio's; Price to Sales, dividend yield, Price to Book Ratio's have been at the very high end (Low end for dividend yield) of the past 20, 30, 50 and 100 years. It's an interesting idea that the huge increase in convertible issues the past year, has created a whole bunch of alternatives to options for institutional and professional traders; and hence, they can drive the VIX lower. Doing so by taking place of a portion of the long options position that a fund manager might normally reserve for long options positions. But also creating a lid on the VIX because the holders of the converts can write covered calls at lower VIX levels. The long holders of convertible issues are insensitive to rises in the underlying stock, and thus will not buy back their calls they have written if the stock goes up. They simple "put" or convert the stock and give it to the person long the call. If anyone has any articles or analysis on this theme I'd love to see it. John