Wednesday, March 10, 2010

A Put/Call Study With Intermediate-Term Bearish Implications

Tuesday’s Put/Call Ratio suggested some complacency among options traders. Below is a study I’ve shown a few times in the past in the Subscriber Letter that appeared in last night’s Quantifinder for gold subscribers.



This study gets off to a bit of a slow start, but then there appear to be solidly bearish implications for up to several weeks out. Even as much as 4-5 weeks out the % winners is exceptionally low, as are the win/loss ratio, the profit factor and the average trade.

5 comments:

Frankie said...

Sorry if you've already answered this question many times, but...
Are your "nn Days Out" CALENDAR days or TRADING days?

Thanks,
Phil M.

veenmr1 said...

Think about it: they cannot possibly be calendar days.

Rob Hanna said...

Hi Phil,

veenmr1 is correct. I use trading days in all my studies when looking at results X days out.

Best,
Rob

Michael Arold said...

Hi Rob,
I think we need to differentiate between EQUITY and INDEX put/call ratio for some reasons. I did a little study where I found a downside edge for low equity p/c readings, similar to you.
Right now,though, we also record a high reading of the index p/c ratio(different situation to what we observed last year several times). I did a little study that indicates that there might be even an upside edge.
http://wp.me/pCTzl-5X

Thx

Michael

Michiel said...

Hi,

When i tried to program this strategy in easylanguage i got only positive net profits. I just cant find out what i am doing wrong.

I am using pinnacle data:
OEX - PC (put call ratio)

Easylanguage code:
Inputs:x(0);

{data1=sp , data2=put/call ratio cboe}

Variables: Var1(0), Var2(0);

If the PercentChange(close, 1) < 0.005 then var1=1 else var1=0;

If low of data2 < lowest (low of data2,40)[1] then var2=1 else var2=0;

If var1+var2= 2 then buy on close;

If barssinceentry=x then exitlong on close;

Can you please tell me what i am doing wrong.

Kind regards,

Michiel C.