Amsterdamtrader

Bedtime for the Call/Put Ratio

Slaap lekkerIntuitively it sounds like a very reasonable theory. With call options investors can speculate on rising prices, with puts they can place their bets on falling stock markets. If relatively more calls than puts are being bought, speculators apparently are optimistic.

put/call ratio get lots of press

Trader blogs are paying close attention to this put/call ratio (Vix and More and MarketSci). Even the derivative exchanges like Chicago’s CBOE publish call/put ratio’s. They even run a derived call/put ratio index. They are missing the point. The only reason this call/put ratio is mentioned now and then is the commercial newsletters have to be filled with “analysis”. Retail traders are having a hard time making a living anyway, and will put their faith in any possible combination of indicators that will justify their trading decisions.

Why put/call ratio makes no sense

As a true kind of financial “common knowledge”, the call/put ratio won’t ever disappear. All tools can and will be used to find the holy grail of the market’s crystal ball.

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