12 replies to this topic

[relax]

Hi again,
first, what is the exact difference between nominal and $ weighted - as you pointed out it shows where the money is being spent

with regards to your example and dumb money versus smart money, would it be correct to say that you make the assumption that the people spending least money, in this case the people buying puts, are the smart money

and also that in order for it to be a signal the nominal and $ weighted value should be somewhat far apart - one below .5 and the other above 1.5

Mark,

Do you know of any places to get weighted PC data? Can TS do it?

tia,
rkd

I get mine from Fari Hamzei. His site is VOLUMINOUS. I don't pretend to get a fraction of what I could out of it. Still, I find his data useful.

I've negotiated a discount for Traders-talk users.

Use this link to get the discount:

http://www.hamzeiana..._TT_details.asp

Mark


When you look at the $-weighted P/C it tells you about the NATURE of the buying. Basically, a low $-weighted implies more MONEY being spent on Calls than on Puts. Now, if the nominal is say 1.50, but the $-weighted P/C was 0.39 then we could conclude that someone is paying up for calls but someone else is buying cheap puts.

Usually I read that as smart money shorting, dumb money risking more to be long.

With me?

Mark

Hi Mark,
could you please take a minute to explain the/your theory behind the low dollar weighted p/c being bearish

obviously more calls are being bought, but isn't that bullish or is it that only the case if the smart money is buying the calls, which would be index calls and not equity calls

thanks for any info ;-

$-weighted QQQQ P/C 0.36. Below 0.50 is Bearish.

FWIW

Edited by relax_dk, 11 July 2007 - 03:23 PM.

[OEXCHAOS]

$-weighted means the volume is multiplied by the price (I believe), then the ratio is calculated from that.

I believe Fari has some white papers on this.

As for smart and dumb money, well, this is contextual. OEX P/C's are not a fade. Nominal P/C ratios, i.e. simply Puts Vol /Calls Vol. measure what folks are buying but not whether they are paying up for puts or calls. Paying up for any option is a potential sign of either hysteria, excessive confidence, or forced purchases (stop outs, etc.).

As for signals, I haven't quantified it into a signal, only that I pay some attention to deviations. I also like to cross reference multiple indices' P/C's, because sometimes, the excessive $-weighted P/C is a "tell". In fact, it was before both the February swoon and the June swoon, if memory serves. Look at the SPX P/C's.

You can actually test this on Fari's site by running a chart of the $-weighted and nominal ratios vs. underlying.

Mark

Hi again,
first, what is the exact difference between nominal and $ weighted - as you pointed out it shows where the money is being spent

with regards to your example and dumb money versus smart money, would it be correct to say that you make the assumption that the people spending least money, in this case the people buying puts, are the smart money

and also that in order for it to be a signal the nominal and $ weighted value should be somewhat far apart - one below .5 and the other above 1.5

Mark,

Do you know of any places to get weighted PC data? Can TS do it?

tia,
rkd

I get mine from Fari Hamzei. His site is VOLUMINOUS. I don't pretend to get a fraction of what I could out of it. Still, I find his data useful.

I've negotiated a discount for Traders-talk users.

Use this link to get the discount:

http://www.hamzeiana..._TT_details.asp

Mark


When you look at the $-weighted P/C it tells you about the NATURE of the buying. Basically, a low $-weighted implies more MONEY being spent on Calls than on Puts. Now, if the nominal is say 1.50, but the $-weighted P/C was 0.39 then we could conclude that someone is paying up for calls but someone else is buying cheap puts.

Usually I read that as smart money shorting, dumb money risking more to be long.

With me?

Mark

Hi Mark,
could you please take a minute to explain the/your theory behind the low dollar weighted p/c being bearish

obviously more calls are being bought, but isn't that bullish or is it that only the case if the smart money is buying the calls, which would be index calls and not equity calls

thanks for any info ;-

$-weighted QQQQ P/C 0.36. Below 0.50 is Bearish.

FWIW

[relax]

i will check fari's site. Thanks for the info!

$-weighted means the volume is multiplied by the price (I believe), then the ratio is calculated from that.

I believe Fari has some white papers on this.

As for smart and dumb money, well, this is contextual. OEX P/C's are not a fade. Nominal P/C ratios, i.e. simply Puts Vol /Calls Vol. measure what folks are buying but not whether they are paying up for puts or calls. Paying up for any option is a potential sign of either hysteria, excessive confidence, or forced purchases (stop outs, etc.).

As for signals, I haven't quantified it into a signal, only that I pay some attention to deviations. I also like to cross reference multiple indices' P/C's, because sometimes, the excessive $-weighted P/C is a "tell". In fact, it was before both the February swoon and the June swoon, if memory serves. Look at the SPX P/C's.

You can actually test this on Fari's site by running a chart of the $-weighted and nominal ratios vs. underlying.

Mark

Hi again,
first, what is the exact difference between nominal and $ weighted - as you pointed out it shows where the money is being spent

with regards to your example and dumb money versus smart money, would it be correct to say that you make the assumption that the people spending least money, in this case the people buying puts, are the smart money

and also that in order for it to be a signal the nominal and $ weighted value should be somewhat far apart - one below .5 and the other above 1.5

Mark,

Do you know of any places to get weighted PC data? Can TS do it?

tia,
rkd

I get mine from Fari Hamzei. His site is VOLUMINOUS. I don't pretend to get a fraction of what I could out of it. Still, I find his data useful.

I've negotiated a discount for Traders-talk users.

Use this link to get the discount:

http://www.hamzeiana..._TT_details.asp

Mark


When you look at the $-weighted P/C it tells you about the NATURE of the buying. Basically, a low $-weighted implies more MONEY being spent on Calls than on Puts. Now, if the nominal is say 1.50, but the $-weighted P/C was 0.39 then we could conclude that someone is paying up for calls but someone else is buying cheap puts.

Usually I read that as smart money shorting, dumb money risking more to be long.

With me?

Mark

Hi Mark,
could you please take a minute to explain the/your theory behind the low dollar weighted p/c being bearish

obviously more calls are being bought, but isn't that bullish or is it that only the case if the smart money is buying the calls, which would be index calls and not equity calls

thanks for any info ;-

$-weighted QQQQ P/C 0.36. Below 0.50 is Bearish.

FWIW