The ACD Method
- Thread starter sbrowne126
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I forgot about the SPY/EEM spread. That baby is on fire now!
Since I started trading options a couple of years ago, I've subscribed to McMillan's free weekly newsletter. He has always mentioned the CBOE Equity only Put/Call Ratio as something he tracks, so I subscribe to that from the CBOE, also free. In all this time it has usually been in the 0.50-0.60 range, give or take.
Yesterday it closed at 1.14. This is the first time I've seen it so high, so I can't tell you what comes next as I'm about to find out myself. Time permitting I might see if CBOE provides free access to historical data and have a look.
This is what McMillan said about it in yesterday's weekly newsletter;
"Equity-only put-call ratios continue to rise, and thus they remain on sell signals. There will not be a buy signal until they peak and roll over."
Yesterday it closed at 1.14. This is the first time I've seen it so high, so I can't tell you what comes next as I'm about to find out myself. Time permitting I might see if CBOE provides free access to historical data and have a look.
This is what McMillan said about it in yesterday's weekly newsletter;
"Equity-only put-call ratios continue to rise, and thus they remain on sell signals. There will not be a buy signal until they peak and roll over."
My Quarterly A down was hit and held Friday for the Naz and RUT. I also had successful tests on Banks, Biotech, Semis and Miners. The S&P and Dow are just a little lower. I didn't buy these tests ahead of a long weekend but will watch to see if we've come down far enough for at least a decent bounce early this coming week.
I like to normalize the data. In other words, in my opinion, using these indicators is worthless if you also don't assess value. For example, the fact that people are buying puts tells me nothing especially if those puts represent value, they are actually good trades. It's when you have high put/call ratios or inversely low ISEE values AND high option premiums that matter. In other words, you have a disproportionate amount of people "overpaying" for vol and vice versa on the upside. Right now vol is still too cheap so the readings are meaningless.
How do you measure if vol is cheap or not? Do you just look at implied vol when measuring if options are cheap vs expensive?
Just look at what you are paying for realized Vol. If you can buy a straddle for 100 handles and the ES is moving 100 handles every two days, that's pretty cheap. A 30 day straddle pays for itself in two trading sessions.
BTW, here is an overlay of the 1998 Asian crisis vs the current one although the assumption here is that the move in August down was the corresponding corrective pattern and the recent move to the new highs was similar to the peak in 2000.
The only thing I'll say to that is being that this is the 2nd longest bull market in world history, I expect the grand finale to be a little more exciting then the re-testing of the highs we made in the 4th qtr. Although I see they are just marking the return from the swing low to the end of year high and not the ultimate high in 2000.
The only thing I'll say to that is being that this is the 2nd longest bull market in world history, I expect the grand finale to be a little more exciting then the re-testing of the highs we made in the 4th qtr. Although I see they are just marking the return from the swing low to the end of year high and not the ultimate high in 2000.
Thanks Mav,
One last question for the day...lol...I think you have touched on this somewhere in the past. How do you account for the NL when you have gap downs and gap ups before open like we had in SPY this past week?