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.
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5 comments:

  1. FrankieMarch 10, 2010 at 12:04 PM

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

    Thanks,
    Phil M.

    ReplyDelete
  2. veenmr1March 10, 2010 at 8:32 PM

    Think about it: they cannot possibly be calendar days.

    ReplyDelete
  3. Rob HannaMarch 12, 2010 at 3:20 PM

    Hi Phil,

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

    Best,
    Rob

    ReplyDelete
  4. UnknownMarch 15, 2010 at 10:21 AM

    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

    ReplyDelete
  5. MichielMarch 17, 2010 at 11:15 AM

    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.

    ReplyDelete