Discussion in 'Options' started by toby, May 29, 2003.
A stock with high put/call ratio, what is the implication?
Please Help; thank you!
Lots of bearish sentiment. Can be a useful contrary indicator.
Find out how the puts and calls are stacked against each other vis a vis their strike prices for the nearest and then next expiration.
Try Bernie Schaeffer's website. He has an enormous amount of info on this.
I went to Bernie's website and he wrote:
Put/Call Ratio : The number of puts traded each day divided by the number of calls traded each day, or the amount of put open interest divided by the amount of call open interest. Such ratios are calculated on individual stocks, indices, or the overall market. Near market lows, the put/call ratio will rise as options traders become excessively worried about downside risk and seek to hedge their portfolios with puts, or speculate on further downside activity. Near market peaks, interest in calls heats up to form a low put/call ratio. The put/call ratio is thus a contrary indicator when it reaches extreme highs or lows.
What about a stock makes new highs but with extremely high put/call ratio? Please advise!
Depends, it could be buy puts, buy stock, stocks heading higher. Had this happen on Tuesday in a stock BPUR. I recognised it and went long. Probably takes some experience though to see it happening.
traders think new high = top => they buy more puts => high put/call ratio but since this is contrary indicator it may mean it will go higher.
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