16 lines
1.1 KiB
Plaintext
16 lines
1.1 KiB
Plaintext
Chapter 29: Introduction to Index Option Products and Futures 523
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is less reliable than the equity ratio, but is still helpful in determining market tops
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and bottoms.
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In summary, the put-call ratio is an easily calculated one. Daily fluctuations can
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be smoothed out into 10-, 20-, or 50-day moving averages. The ratio should be inter
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preted bullishly when there is too much put buying and bearishly when there is too
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much call buying. The phrase "too much" is not easily interpreted, but looking for
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local maxima or local minima in the chart pattern is a reasonable way to approach the
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problem. When the put-call ratio moving average is increasing, a buy signal would
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not be given until the average rolls over and begins declining; a sell signal would be
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generated when the average which is declining bottoms out.
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SUMMARY
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There are several kinds of indices and several kinds of trading vehicles: cash-based
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options, futures options, and futures. These various underlying securities have dif
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fering terms in the way they trade and also in the way their options are designed. This
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variety creates many opportunities for astute option strategists. |