Put/call ratio.

T

trader2056

Hi Guys,

Let's say you use put/call ratio as part of your trading strategy, which put/call ratio would you use?

1. put/call ratio based on exchange-trade volume.
2. put/call ratio that also takes into account OTC traded volume.

Regards
Trader2056
 
Last edited:
What use is Put/Call Ratio?

  • Call Credit Spreads are not bullish.
  • Covered Calls are not bullish.
  • Short Calls are not bullish.

As you can see the above positions involve calls only and the Put/Call Ratio signals BULLISH. Back to the drawing board.


:)
 
Why would you pick any of them? Put call parity and the ability to short stocks and treasuries means that you can produce the same exposure with a put as a call, making a ratio between the two as meaningful as the put/put ratio.
 
It's a blunt indicator. You never really know if it is a position or a hedge. It doesn't show net delta. It doesn't show convexity.

Use what you can get easily.
 
xandman said:
It's a blunt indicator. You never really know if it is a position or a hedge. It doesn't show net delta. It doesn't show convexity.

Use what you can get easily.
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So, what about using OI of say x% OTM puts vs x% OTM calls as a comparator for bullish/bearish indicator for that particular underlying?
 
ironchef said:
So, what about using OI of say x% OTM puts vs x% OTM calls as a comparator for bullish/bearish indicator for that particular underlying?
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Rather exotic, where can I read more about this?

There is a phenomenon called "pinning" that you can research further. But, that is in Secret Sauce territory.
 
xandman said:
Rather exotic, where can I read more about this?

There is a phenomenon called "pinning" that you can research further. But, that is in Secret Sauce territory.
More...
I don't know, being new to options trading, I kind of assumed index is for the pros because of their high volume and liquidity and I figured I was not smart enough to trade against them so I mainly traded thinly traded underlying. I noticed for those, there were often mismatched between OI for calls and the counter puts (not to confuse with put/call parity) and traded accordingly and sometimes I got good results, even with wide bid/ask.

Again, thanks for your "pinning" suggestion. I will take a look and hope to learn something new.

Regards,
 
Be careful of theoretical rabbit holes. Keep studying the (options)Greeks and model your trades.

"80% of what you need to know in trading, you already know. You just don't know it yet."
- Confucious, 1200 BC
 
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