Put / Call Ratio influence on S&P 500

Drawdown Addict said:
PCR indicators don't include volatility so they are reliable when waters are calm.

https://www.researchgate.net/public...nd_the_put-call_ratio_a_tale_of_three_markets

If you try to use the indicator in an agitated market results can be unpredictable.

I use PCR as the main indicator in my model, but it has to be adjusted with many other drivers, volatility being one of them.
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Thank you for an insightful response.

I recently "discovered" that stock indices basically have x2 modes, calm & volatile. And one basically has to have switch to start or stop trading according to volatility. It seems that VIX is best among many options as this "switch". For example using VIX as a switch drastically improves performance of opening range breakout systems.
 
Traders normally love volatility, since it provides wider ranges. So if you stop when volatility is high you'll act against the majority.

The bigger the risk the more chances to profit. We don't talk about drawdowns here...
 
It is literally worthless. Zero utility.

Run a risk-reversal figure in real-time. "Main indicator" in his model. That explains a lot.
 
Really doubt its useful at all. Plenty of guys think they're hot shit in options, and yet they know fuck all about how they're priced and hedged... LOL

You want volume ratios? You can try $VOLD or the NYSE DJX order flow monitor -- $TIKI.

You want edge on index, you should be watching mega cap implied vols, synthetic futures, VWAPs, rates, and even index basis spreads.

If you want to get quantitative, at least do it with some kind of awareness of what's available.

The 25d RR is how vol guys monitor the options market, also mm doing it.
 
As they say, a picture is worth a thousand words...
index spreads.png
This is a panel of index spreads with the hedge leg overlayed (left). Orange is RTY and green is YM. The spreads are in white.


You still think this shit isn't related to index trading?

This is the NYSE $TIKI indicator with dow futures overlayed.
DOW TICK.png


If you had any doubt at all, just look at the chart. Green is the YM contract, and the ups and downs are "breakouts" in order flow. This indicator ranges from -30 to 30 where a reading of 30 means every stock in the dow is trading on the offer (aggressive buying), and vice versa.

My formula is like [$TIKI - EMA($TIKI,20)] which is very similar to using a lagged price to monitor the delta in the order flow metric. I'm also using HIGH/LOW functions and differences/summations of price vs them. The ribbon is just simple SMA ribbon on that function.
 
Real Money said:
As they say, a picture is worth a thousand words...View attachment 348336This is a panel of index spreads with the hedge leg overlayed (left). Orange is RTY and green is YM. The spreads are in white.


You still think this shit isn't related to index trading?

This is the NYSE $TIKI indicator with dow futures overlayed.View attachment 348338

If you had any doubt at all, just look at the chart. Green is the YM contract, and the ups and downs are "breakouts" in order flow. This indicator ranges from -30 to 30 where a reading of 30 means every stock in the dow is trading on the offer (aggressive buying), and vice versa.

My formula is like [$TIKI - EMA($TIKI,20)] which is very similar to using a lagged price to monitor the delta in the order flow metric. I'm also using HIGH/LOW functions and differences/summations of price vs them. The ribbon is just simple SMA ribbon on that function.
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Can I ask why you aren’t reducing your ratios? Are we still in middle school?
 
poopy said:
Can I ask why you aren’t reducing your ratios? Are we still in middle school?
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What's the point. Those are the cash values of the spreads (mini).

I mean, the pnl is on the chart dollar for dollar. You can reduce the ratio, but then you will have to mentally calculate the pnl. Also, the lowers are auto-scaled.
 
Real Money said:
Really doubt its useful at all. Plenty of guys think they're hot shit in options, and yet they know fuck all about how they're priced and hedged... LOL

You want volume ratios? You can try $VOLD or the NYSE DJX order flow monitor -- $TIKI.

You want edge on index, you should be watching mega cap implied vols, synthetic futures, VWAPs, rates, and even index basis spreads.

If you want to get quantitative, at least do it with some kind of awareness of what's available.

The 25d RR is how vol guys monitor the options market, also mm doing it.
More...

The way I look at that is, I'll just get the data and then do the stats on it. If stats works then it works.

Even James Simmons said we can't prove that something works, we can only calculate statistical significance, and then choose to trade it or not. There is statistical method called Principal Component Analysis ( PCI ) and it will tell one how real the influence is.
 
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