Replies to post #256279 on Zeev's Turnips Patch-No Politics (ZEEV)

[gtober]

I don't see how this information cannot bring the validity of the indicator into question. The extremely high put/call ratio has flown in the face of common sense for some time now. We certainly have not had the type of sell-off normally associated with these high readings. The $VIX, $VXO, $VXN are near 52 week lows. What this is saying is that people are buying droves of puts in relation to calls, but they are not paying any premium for them. There is no sense to that. While this explanation is hardly conclusive, it is easily sufficient enough for me to view the indicator with an asterisk.

[Patrick Bateman]

you are assuming the trend is the same on other exchanges but he's showing you that your assumption is incorrrect - the trend ISN'T supported when looking at all the data

an EPC of 1 and .65 aren't even close

[zerofinance]

According to the below link, the P/C ratio is as high now as it was at the last 2 major bottoms.

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

On the other hand, number of bearish advisors isn't that high... (hard to get everything to line up, huh?)

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

thanks
zerofinance

[shack]

Well I wouldn't consider 0.65 high but that's a matter of opinion.

Understand that the "all exchange" P/C has been fairly high as well with respect to its historical range, but it has not been as extreme as the CBOE numbers. As such I think you should be careful with terms such as "unprecedented" when describing the number. The bottom line is that the "all exchange" number which I track and have been tracking for years ecompasses the CBOE trading. But since it takes into account all options trading then it is necessarily more accurate.

I'm not trying to "rationalize" the high CBOE number away. I'm not sure what purpose that would serve. But the amount of chatter the CBOE number has been getting in the financial press as well as on many discussion boards needs some perspective. If you want to continue using the CBOE number than that's your perogative, but overall we are simply not at the extreme levels in put buying that this figure would lead you to believe. Take from that what you will.