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.


Frankie said...

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

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.


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.



Michiel said...


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:

{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.