Comments on: Option Traders Are Pushing Their Luck

by: Babak

Fri, 05 Jun 2009 03:51:45 +0000

I think the ISE needs higher numbers to be effective at finding extreme optimism. Somewhere above 250 definitely. Take a look at the highest readings and the subsequent S&P 500 returns here: ISE Sentiment Extremes & The Stock Market

by: Brooklynnative

Thu, 04 Jun 2009 05:41:22 +0000

I see greater than 200 readings on the ISE on the dates of April 13, 14, and 15. Maybe it’s not so reliable. I wish I had been buying then.

by: Babak

Tue, 14 Apr 2009 22:32:02 +0000

I got word back from my contact at ISE - there was a correction for last Thursday: instead of 174 it is 153 (equity only). Today's ratio came in at 206. So we're continuing to see elevated call buying. StockManiac2008, you're right, just by a hair. I actually mentioned this when it happened. This is really puzzling of course because the standard playbook is that the ISE ratio is contrarian but early March was the kick-off to the rally (?). Tim, no, Dec 2008. Wes, the CBOE numbers would reflect institutional trading but not the ISE sentiment index. Jim, the only source I know that uses OCC data is Sentimentrader by Jason Goepfert. I did a review of the site you can check out in the link. Anyway, he has a proprietary retail model called ROBO. The downside is that there is a bit of a lag to the data.

by: Jim

Tue, 14 Apr 2009 20:43:34 +0000

One interesting source for options interpretation I've found recently is at the OCC The data is only reported weekly, but you can see the opened put and call positions for the 1-10 order size, which I imagine is a good proxy for how Joe Schmoe retail investor is playing options. Does anybody know of a source that charts the OCC numbers?

by: Wes

Tue, 14 Apr 2009 18:21:16 +0000

Another way of looking at these wacky ratios, are to acknowledge, that they may be hedges. It has become known that Goldman has been churning a lot of certificates

If that massive amount of traffic, was Goldman getting set up large for the downside, then they would be hedging those positions with the most effective price point of out of the money call options. Perhaps what we are seeing is not a bunch of dopes lining up to get slaughtered on a reversal, but a large firm preparing for another leg down and managing their risk levels.

by: Tim Sykes

Tue, 14 Apr 2009 15:59:16 +0000

Do you mean Dec 2007?

by: jeremy

Tue, 14 Apr 2009 14:10:22 +0000

Yes, many thanks, another insightful post.

by: Paul Leung

Tue, 14 Apr 2009 05:58:52 +0000

Also thank you for a great blog. I regularly read your articles.

by: StockManiac2008

Tue, 14 Apr 2009 04:47:59 +0000

First off, thank you for your blog. I am learning a lot from you.
I wanted to point out a correction about ISEE sentiment index. Last time ISEE equities was above 200 was Mar 9th (201). On Mar 9th, ISE closed at its 52 week high of 220 (all securities), now we all know how things turned out since then.
Hope you hear back from ISE about their data validity.
-net