To: Ruyi who wrote (21832 ) 4/18/1999 12:04:00 PM From: Serge Ladouceur Read Replies (1) | Respond to of 37507
Once again you're using investor talk to suit your goals as if you were a big "connaisseur" of the investment world. You're oversimpliflying the notion and the interpretation of the put to call ratio. Please read the following excerpt from BARRON'S December 7, 1998 on this subject. (Oh yes, may I remind you the options expired saturday april 17th, were overwhelmingly call positive.) ------------------------------ "BARRON'S December 7, 1998 Go With the Flow? Or, sometimes, against it. It's your option By MICHAEL SANTOLI Options strategists comb the daily polling statistics with the intensity of James Carville in late October. For these market handicappers, the key data are opinions as expressed through put and call volumes, not approval ratings. And when it comes to options, more so than elections, a yes vote is often interpreted to mean no. That is, when puts greatly outnumber calls -- when there's a majority of bearish votes -- it's taken to be a bullish sign for underlying stocks, in the best contrarian tradition that contends the crowd is usually wrong. Yet there is also a camp that, conversely, looks for lopsided options activity as a sign that smart money is mobilizing behind a hot new trade and should be followed to eventual riches. This column last spring noted that the merits of each approach seemed to depend on the size and prominence of the stocks considered, with contrary analysis more suitable for large stocks and the where-there's-smoke-there's-fire method more applicable to relatively obscure names. Now options strategist Larry McMillan, who tends to utilize both approaches at times, has taken a deeper look into the reliability of put-call analysis in various situations. He begins with the presumption -- based on the proven behavior of futures and index options -- that the indicator is fundamentally quite predictive. The reasons put-call numbers may not send as clear a signal for individual stocks are the distorting effects of takeover rumors and other potentially inside information that can drive prescient call buying. This is a particular hazard with smaller, less-understood stocks. McMillan concludes, though, that put-call contrarian analysis is best suited to "very large, liquid stocks that are generally not subject to being taken over." He illustrates by showing how put-call ratios would've flashed a buy signal for Intel around 67 in June, followed by a sell in the low 90s in August and then another buy near 80 in September. And take note: Another sell signal in Intel, recently near 114, appears imminent. This is not the last word on the widely cited put-call indicator. After all, a flurry of call activity in Intel could possibly come from covered-call sellers, rather than bullish speculators. Still, the data go a long way toward refining the task of predicting the outcome of stock-market elections, at least in the national and statewide races if not the small-time sheriff campaigns. (...)"