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TW Patron++
Posts: 1,054
Reply with quote  #1 
Last week, the smallest retail equity options traders (1 to 10 contracts per transaction) posted their highest Buy-To-Open (BTO) Put-Call (PC) premium ratio since early March 2003.  This data is published by the Options Clearing Corp (OCC), but the OCC does not indicate if the transactions were in-the-money, at-the-money, or out-of-the-money, so last week's spike in average premiums paid per put contract could be a result of heavy volume in deep in-the-money puts.  Regardless, this is the highest small trader BTO average contract premium PC ratio in over 5.5 years.

The average small trader BTO call contract premium was $320 last week, while the average BTO put contract premium was $387.

The small trader equity options BTO volume PC ratio also made a strong move up last week to 0.75, which is a high level for bull market conditions, but may need to rise higher to flag an IT bottom in this environment. 

The total retail BTO average premium per contract BTO PC ratio also reached its highest level last week (1.29) since early March of 2003.  The average retail average premium per contract BTO PC ratios were significantly higher in 2002, so this current level doesn't guaranty a solid price bottom is in place, and typically, we like to see these tools roll over for generating buy signals.

The OCC also provides daily put and call volume (not BTO though unfortunately) for all equities, index, and ETF contracts for market makers, retail traders, and brokerage firms.  The market makers are particularly dominant players in the OEX options contract volume.

This next indicator is the difference between the market maker OEX PC ratio and the retail trader OEX PC ratio. This indicator is suggesting there may be more price downside remaining since solid bottoms over the past several months occurred when this tool is above 0.2, and it currently at 0.11, so it is moving in the right direction for the bullish case after giving a good sell signal a few weeks ago.

Another indicator suggesting there may be additional chop or decline in prices before an intermediate term bottom is built where prices can move significantly higher is NYSE daily short sale volume as a percentage of sell volume, which can be found on the NYSE web site each day.

For this short sale volume tool, we track the daily number of standard deviations from the mean of the short sale volume percentage (of total sell volume). Normally, solid IT bottoms are accompanied by this indicator being one standard deviation or more above the mean.  With the current average standard deviation value below the mean, this indicator is voting for higher short sale volume as a percentage of sell volume before a good IT bottom is established.

There are several good shorter term tools suggest a good bounce in price may be nearing, but the longer term shorting related tools are voting traders will need to get more beared up than they currently are for a sustainable up move.



TW Member
Posts: 32
Reply with quote  #2 
In a bear market this group seems to be correct.....Maybe they use the puts as protection instead of speculations....1/7/00 to 12/7/02 looked like the inverse of the indexes....
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