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Reply with quote  #1 
As an addendum to Johnny's index futures COT data in the main forum, it may be of interest to review the current status of the equity options market maker positions.  This is weekly data released by the OCC which includes equity options transactions for retail customers, firms, and market makers.

The firms and market makers would be the equivalent of the commercials in the futures markets, but in the options world it appears the firms use equity options for augmenting other strategies bearing little useful information.  The OCC does not publish the market maker's Buy To Open (BTO) volume or premiums for equity calls and puts, but the closing of those market maker positions are published, and does provide useful insights into what the market makers are up to.

Below is an illustration of the market makers' BTO closing position call-put ratio smoothed with a four week moving average.  The 4 week MA, at 1.39, is currently in the lower range of this indicator's domain.  Typically, the market makers begin closing up their BTO call positions well in advance of a significant price decline, which is evident as the blue curve moves to its upper range. 

Once the blue curve rolls over after reaching at least 1.50, one can then start monitoring other tools to look for signs of a tradeable decline in the works.  Last week, the market makers' call-put ratio was 1.52 (single week value), which is the minimum threshold for the four week MA, but in the past, a string of several weeks with call-put ratios above 2.0 are posted well before a sustained price decline.

This time could be different, but based upon the current commercials COT data configuration for stock index futures, and the fingerprints of the equity options market makers, it doesn't appear either of those groups are preparing for a major price sell off at this time.


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