SgtPepper's Picks from the Option Force Monitor

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Strategies & Market Trends
SgtPepper's Picks from the Option Force Monitor

An SI Board Since April 1999

Posts	SubjectMarks	Bans
36	0	0

Emcee: SgtPepper	Type: Unmoderated

Introduction Compact

This thread was started to report the results of a new theory of option-related "forces". The Option Force Monitor generates short- to intermediate-term timing signals for trading stocks, stock indexes, commodities and other futures.

The underlying theory applies to individual stocks and stock indexes, as well as the grain, bond, crude oil, cattle, metals, currency, and other futures markets. The only requirement is a substantial amount of option writing activity by big players in the derivatives markets.

Most trading systems are based on either

1. the theory of perfect markets and random price movements, or
2. certain patterns observed in a simple plot of price versus time.

The option force theory states that big players can control the price in any market on any given day. Option expiration week is one of the times when these market imperfections are best observed.

The Theory

The Option Force Monitor is used to screen many markets and highlight possible turning-point situations. In this use, the theory is a more complex mathematical reflection of the contrarian model summarized in the ordinary put/call ratio. When too many calls are outstanding, the model expects the price to drop. If more calls are purchased, the price should fall more. If too many puts are outstanding, the model expects the price to rise. If more puts are purchased, the price should rise more.

The root of the theory is that option sellers win on expiration day. The extension of this verbal proposition to mathematical equations is best visualized as a theory of option forces. Higher put open interest pulls the price up, higher call open interest pulls the price down. Upward forces are positive, downward forces are negative. A unique balance point exists at the center of option forces, where the option sellers have no reason to move the price up or down. The theory indicates that the price should approach the price at the center of option forces on expiration day.

While the theory may generate doubts in the eyes of those who believe the conventional wisdom that price movements are random, the results indicate otherwise.

geocities.com

Go to reply# or date (mm/dd/yy):

Reply	Message Preview	From	Recs	Posted
36	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 09/10 -----------	SgtPepper	-	9/2/1999
35	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 09/03 ----------	SgtPepper	-	9/2/1999
34	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/27 -----------	SgtPepper	-	9/2/1999
33	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/20 -----------	SgtPepper	-	9/2/1999
32	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/13 -----------	SgtPepper	-	9/2/1999
31	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/27 -----------	SgtPepper	-	8/15/1999
30	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/20 -----------	SgtPepper	-	8/15/1999
29	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/13 -----------	SgtPepper	-	8/15/1999
28	x	SgtPepper	-	8/15/1999
27	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/20 -----------	SgtPepper	-	8/7/1999
26	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/13 -----------	SgtPepper	-	8/7/1999
25	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/06 ----------	SgtPepper	-	8/7/1999
24	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/13 -----------	SgtPepper	-	7/31/1999
23	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/06 -----------	SgtPepper	-	7/31/1999
22	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 07/30 ----------	SgtPepper	-	7/31/1999
21	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 08/06 -----------	SgtPepper	-	7/26/1999
20	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 07/30 -----------	SgtPepper	-	7/26/1999
19	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 07/23 -----------	SgtPepper	-	7/26/1999
18	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 07/30 -----------	SgtPepper	-	7/22/1999
17	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 07/23 ----------	SgtPepper	-	7/22/1999
16	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 07/23 -----------	SgtPepper	-	7/13/1999
15	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 07/16 ----------	SgtPepper	-	7/13/1999
14	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 07/16 -----------	SgtPepper	-	7/9/1999
13	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 06/18 -----------	SgtPepper	-	6/25/1999
12	FORECASTED AND CLOSING PRICES FOR EXPIRATIONS OF WEEK ENDING 06/11 -----------	SgtPepper	-	6/25/1999

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