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us cboe put/call warning


  1. The ratio of Puts to Call Options filled on the Chicago Board (of) Options Exchange CBOE tends to be an excellent indicator of forward looking market complacency as a contrarian indicator, because the herd so reliably gets it wrong.

    Readings exceeding unity for this indicator, i.e. 1.15 or more, represent a very high ratio of Puts bought, and typically occur at the worst moment of a capitulative sell off. Although, a little of this is sane professionals taking say one or two OEX Puts, as insurance for extreme long spec positions entered in elsewhere.

    Low Put/Call ratio, well below unity, i.e. less than 0.65 with few Puts sold, more particularly with many more Calls, often occur, only a few weeks before both minor and major sell offs.

    As the following weekly chart of the fill ratio shows, most of the major sell offs over the last three years have been preceeded by the public buying far, far too high a ratio of calls, in their complacency.

    See pre-March/April 2000, pre-December 2000, pre-September 2001, and pre- July24 2002.

    http://stockcharts.com/def/servlet/SC.web?c=$CPC,uu[d,a]whclyyay[pc20!f][vc60][iLa12,26,9]&pref=G

    Guess where it is now? Yes, you wiill need to cut and paste it quickly into IE6.0+ , but well, worth a look.

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