S&P 500 Put/Call Ratio

I wanted to throw out this idea for the S&P 500 (SPX not the ES) Put/Call Ratio. I have data going back to 4/1/2002 until 9/30/2003. (I have it up to date but not with me now).

I noticed that the S&P and the put/call ratio is negatively correlated. For example, when the ratio is high then the S&P will probably decline the next day.

I determined when the ratio is “high” is when it is 3.0 or over. Over the time frame this has happened a total of 11 times. 10 out of those eleven times S&P went down at least 2.5 points from the previous days close. Making 91% rate.

The “low” ratio is when it is 0.90 or below. Over the time frame this has happened a total of 43 times. 37 out of those 43 times the S&P went up at least 2.5 points from the previous days close. Making 86% rate.

The obvious drawback is I don’t know which came first the high of the day or the low of the day so I could have went through a 15 point decline only to see it rebound at the end of the day by the 2.5 points. I also don’t have any stops included in those numbers. That is why I am posting to see if there are any good ideas for stops in this idea.

Eric

 

Does esignal have the put to call ratio as one of their symbols?

Where can I get the info?

 

i have the info in a spreadsheet that i have been keeping for the past several years...the only place where I know you can get this info is at the cboe...but it would be a real pain to get it there

 

This is not something we have yet, but it is an item we are looking to carry soon (read as in the next few versions of eSignal.) Please check on our 7 Series Beta forum for beta announcements.

 

Jason Goepfert at Sentimentrader.com has done extensive work on this and has an indicator that tracks it.

Best,

Mike

 

Thanks yeah it looks like a really good site. I don't know if we are using the exact same parameters or not but I suppose the general concept is the same. I have also done some research on the TRIN and but I like the S&P500 put/call ratio better. The combination of the two would provide more signals.


Eric

 

Jason has looked at SPX data since 1997, and unfortunately the
relationship didn't hold up. Any time the SPX p/c ratio was 3 or
higher, the S&P was lower the next day 43% of the time, with an avg return of 0.0%. Any time after a p/c ratio of 0.9 or below, the S&P was higher 54% of the time, with an avg return of 0.1%. Neither seem to besignificantly more or less than random.


He has a much more sophisticated measure which takes into account how much SPX option volume is traded above ask and below bid, to try to get a feel for the buying and selling interest of the traders. SPX options are very tricky to analyze, since so many institutions sell them to open as part of a comprehensive trading strategy. Still, the indicator can be relatively
useful at times. Currently, it's neutral and not giving a hint one way or the other.

If any of you enjoy market research or follow sentiment extensively, check out his site.

Best,

Mike

 

Mike,

I wonder where he is getting his data from. I assume it is from CBOE. They have different #'s from where I get my data. I try to get the same results using CBOE and they weren't nearly as good.

Eric

 

not sure, but since he rifles through so much data, Im pretty sure he has a good service

 

Related link


http://www.vtoreport.com/sentiment/putcall.htm