Why the Massive Put/Call Ratio?

[william the wie]

I was bored and did some checking for some covered puts I intend to write in June with expiration in Dec.They all had p/c ratios that struck me as really lopsided and at least one with an infinite ratio, no calls at all purchased. (discrete and finite math rules are different as in negative slack is the undefined quantity and an empty container is an oddity that needs explaining.) This is a sign of no crash for at least seven months. That seems strange to me. Any ideas?

 

[DarkFury]

They say that non professional traders tend to be more bullish.
What is the current call volume of what you are looking at?
Do you have a SharpCharts charting tool on your computer?

 

[Toddsterpatriot]

I was bored and did some checking for some covered puts I intend to write in June with expiration in Dec.They all had p/c ratios that struck me as really lopsided and at least one with an infinite ratio, no calls at all purchased. (discrete and finite math rules are different as in negative slack is the undefined quantity and an empty container is an oddity that needs explaining.) This is a sign of no crash for at least seven months. That seems strange to me. Any ideas?

Why do you want to sell covered puts?

 

[william the wie]

They say that non professional traders tend to be more bullish.
What is the current call volume of what you are looking at?
Do you have a SharpCharts charting tool on your computer?

sorry DF without going too far into how I do it I am looking for cash on cash returns.In order to avoid uneeded disclosure my answer is going to sound more or less like crap. My goal is to make 30+% cash on cash after hedging and transaction costs. This is possible only if there are both active puts and calls markets six months out. The money you obtain from selling covered options is called a premium because technically it is insurance against the market going against the buyer and like the extended warranty offered on refrigerators this is very profitable insurance to sell.

 

[Shrimpbox]

Seven months would be about the time the new president gets in.

Discrete and infinite math rules are different as in negative slack is the undefined quantity and an empty container is an oddity that needs explaining.

I am not sure I am smart enough to have that statement explained to me.

 

[william the wie]

Let me give it another try. if you have 4 active strike prices with both puts and calls at the same expiration there are 6 (3+2+1) 4 option equilibrium sets involving buying a put,buying a call, selling a put and selling a call. Then there is a unique price based on Black and Sholes for each of those 8 options. These two different pricing models lead to different prices and 6, 8 and 10 option sets that give other prices so this can get complicated real fast.

Does that help?

 

[Toddsterpatriot]

Why do you want to sell covered puts?

 

[Shrimpbox]

A man has to know his limitations.

 

[william the wie]

Anyhow when there are 2.4 puts per call that issue is going up. At 13 to 1 making 3% in as little as 5 calender days is the rule not the exception.

 

[Toddsterpatriot]

Why do you want to sell covered puts?

 

[william the wie]

It went strange the other way when I was checking out another stock over the weekend put/call ratio was 0.00X. I'm beginning to suspect that a lot of underreported hot money is pouring into the country.

 

[Toddsterpatriot]

You never explained why you want to sell covered puts.

Makes me suspect you don't understand the meaning.

 

[william the wie]

It either reduces cost of acquisition by @12.5% in the utility company I wrote one on today or I make an APR of 10%. I'm happy with either outcome. While I don't want to fight a pump and dump accusation by going into exact details of what I do but Marketwatch has a piece on dividend superstars that have raised dividends every year for the past fifty years and you can use the same criteria on them to get similar results.

Write a put on Lowe's, which I am not in for various reasons, at or near current price.

At an expiration six months out for 5% money was what I got when I ran the numbers.

That list will give you 18 issues to play with.

 

[Toddsterpatriot]

It either reduces cost of acquisition by @12.5% in the utility company I wrote one on today or I make an APR of 10%. I'm happy with either outcome. While I don't want to fight a pump and dump accusation by going into exact details of what I do but Marketwatch has a piece on dividend superstars that have raised dividends every year for the past fifty years and you can use the same criteria on them to get similar results.

Write a put on Lowe's, which I am not in for various reasons, at or near current price.

At an expiration six months out for 5% money was what I got when I ran the numbers.

That list will give you 18 issues to play with.

It either reduces cost of acquisition by @12.5% in the utility company I wrote one on today or I make an APR of 10%.

You said covered puts.
So you don't know what that means.

 

[william the wie]

How old are you 12?

 

[Toddsterpatriot]

How old are you 12?

Old enough to see you don't know what you're talking about half the time.

 

[william the wie]

OK dummie a covered call is created when you:

Sell a put that is covered by enough money that the underlying can be bought at the strike price

The money includes the premium which for today was $1.95 at a strike price of $40

1.95/38.05 = 5.1% for six months or an APR of 10,5%

The underlying was $@43 for a 7% discount to current price so if exercised 7+5= 12, which is the percentage discount on that utility I would get and notice it does not include future call premiums from that issue. Now get your mommy to explain that to you. I will not be available because this is the third elementary school math error in your arguments.

 

[Toddsterpatriot]

OK dummie a covered call is created when you:

Sell a put that is covered by enough money that the underlying can be bought at the strike price

The money includes the premium which for today was $1.95 at a strike price of $40

1.95/38.05 = 5.1% for six months or an APR of 10,5%

The underlying was $@43 for a 7% discount to current price so if exercised 7+5= 12, which is the percentage discount on that utility I would get and notice it does not include future call premiums from that issue. Now get your mommy to explain that to you. I will not be available because this is the third elementary school math error in your arguments.

OK dummie a covered call is created when you:

Sell a put that is covered by enough money that the underlying can be bought at the strike price

Wrong. A covered call is when you buy the underlying and sell the call.
What you're describing is a naked put.

 

[DarkFury]

It went strange the other way when I was checking out another stock over the weekend put/call ratio was 0.00X. I'm beginning to suspect that a lot of underreported hot money is pouring into the country.

I sent this thread out to a friend because this is not my style of investing. What struck me was the "under reported" money.
About 20% of that "money" is not money as you or I would see it.
20% of that money is debt/IOU's. They are allowing third party debt to be counted as "cash" at greatly reduced rates.

So while you and I would be putting cash on the table, somebody like Todd would be allowed to finance his buy with another's debt.
That is not a smart move. The advantage to Todd would be two fold. He draws the interest PLUS recovers some of the principle on the debt PLUS any profit by the investment.

Like I said NOT my style of investing and the reasons seem pretty clear.

 

[Toddsterpatriot]

It went strange the other way when I was checking out another stock over the weekend put/call ratio was 0.00X. I'm beginning to suspect that a lot of underreported hot money is pouring into the country.

I sent this thread out to a friend because this is not my style of investing. What struck me was the "under reported" money.
About 20% of that "money" is not money as you or I would see it.
20% of that money is debt/IOU's. They are allowing third party debt to be counted as "cash" at greatly reduced rates.

So while you and I would be putting cash on the table, somebody like Todd would be allowed to finance his buy with another's debt.
That is not a smart move. The advantage to Todd would be two fold. He draws the interest PLUS recovers some of the principle on the debt PLUS any profit by the investment.

Like I said NOT my style of investing and the reasons seem pretty clear.

What struck me was the "under reported" money.

What's that?

20% of that money is debt/IOU's. They are allowing third party debt to be counted as "cash" at greatly reduced rates.

Third party debt?

So while you and I would be putting cash on the table, somebody like Todd would be allowed to finance his buy with another's debt.

I know I can finance a trade with debt, or pay cash, how can I finance with another's debt?

The advantage to Todd would be two fold. He draws the interest PLUS recovers some of the principle on the debt PLUS any profit by the investment.

I draw interest on what?
How do I recover principal and what about interest I'm paying on this debt?

PLUS any profit by the investment.

Leverage is great, until the trade goes against you.
It seems you're a bit unclear on the concept.