Options Predictive Power

Discussion in 'Financial Futures' started by StreamlineTrade, May 10, 2006.

  1. StreamlineTrade

    StreamlineTrade Guest


    I was hoping somebody could throw some light on an issue I have been wondering about.

    Is there any way of using options data such as put/call ratios, open interest or other things to predict the future price of the underlying?

    I appreciate it will never be an exact science, but I am sure I have read about this somewhere. The thinking goes that due to the leverage options give, and that a lot of big players primarily use options in their preparatory trading activities (eg Hull/Goldman Sachs et al), understanding what side of the market the money is on could be of help coming up to expiration, as these traders will sell/buy the underlying to the death in order to keep the options In The Money.

    Is there any merrit in this line of thought? What should I (we) be looking at?

    Thanks in advance for any insight.


  2. FredBloggs

    FredBloggs Guest

    i have a little info on this. i will dig it out and post when i have some time.

    not sure how useful it is though as everyone would do it and wed all be rich! besides, institutions busting other institutions out of positions = more liquidity = more $, but it could be worth looking into......
  3. plax