Fewer puts than calls

[william the wie]

2.4 puts per call is the more or less neutral point less than one put per call which is what I am seeing and that is a fairly good indication of a downturn in the near future.

 

[Dont Taz Me Bro]

I think the market has run up way too high too fast

 

[william the wie]

I think the market has run up way too high too fast

Definitely true. Also even semi-observant Jews tend to get out of the market before Rosh Hashana (Sept 9th this year) until the end of Yom Kippur (Sept 19th) and that can shift charts.

 

[justinacolmena]

A put is a "gentleman's agreement" from the "house" to buy back stock from a consumer investor at no less than a certain price.

Trouble is that there's no money to back it up when the market falls.

A call is a lottery bet on a bull market for any particular stock. Plenty of suckers.

 

[MarathonMike]

2.4 Puts per call is average? That would seem to be a very bearish sentiment, I thought the average PCR was under 1.

 

[william the wie]

2.4 Puts per call is average? That would seem to be a very bearish sentiment, I thought the average PCR was under 1.

Think it through, when a put is exercised shares or contracts in the underlying have to be bought to permit the exercise which causes the price to rise slightly for a time. but more puts having to be exercised put a floor under the underlying.

 

[MarathonMike]

Ok I got it, but I was asking if the market average for Puts to Calls is really that high. Unless you meant something else by 2.4 Puts to Calls being a neutral point.

 

[william the wie]

Ok I got it, but I was asking if the market average for Puts to Calls is really that high. Unless you meant something else by 2.4 Puts to Calls being a neutral point.

I took a sample of 30 issues that met my criteria of five years of increasing dividends and at least a 5% current dividend yield. I was able to sell covered calls at a price where I would have a capital gain and a premium yield = to my minimum annual dividend on six issues if exercised.

Those six issues are EDF, GUT, HRZN, ORC, PEI, & SDPL. There were three other issues where I got a quick down and dirty return that convinced me I needed a stronger cash position and some hedges. So, I looked over the other 24 issues that made the cut for dividends criteria but did not make the cut for a covered call position nor for writing puts. That after only 48 hours after I had written the calls. I doublechecked sources on the put call ratio and they mostly agreed on the 2.4 or more puts per call Investopedia had the simplest explanation of why that is true. Cellblock is a good source here on this board. I'm thinking about buying some index options to cover for a downturn but otherwise this market is getting too rich for me.

 

[Toddsterpatriot]

A put is a "gentleman's agreement" from the "house" to buy back stock from a consumer investor at no less than a certain price.

Trouble is that there's no money to back it up when the market falls.

A call is a lottery bet on a bull market for any particular stock. Plenty of suckers.

Trouble is that there's no money to back it up when the market falls.

When the market falls, why do you think I need money to "put" my stock?

 

[Toddsterpatriot]

Ok I got it, but I was asking if the market average for Puts to Calls is really that high. Unless you meant something else by 2.4 Puts to Calls being a neutral point.

He's talking out of his ass again.

 

[justinacolmena]

You guys are forgetting a nifty piece of financial gimmickry called "put-call parity." It works like this:

S + P = C + K

where

K = the strike price in cash
P = the put option
S = the stock
C = the call option

So any particular stock plus a put option is equivalent to a call option plus the cash to exercise it, all other things (strike price and deadline) being the same. Of course the stock gets voting rights, but the call option does not, so brokers sometimes create artificial shares of stock from the right-hand side of the equation; and they justify selling such artificial shares to margin investors in that their shares of stock are not "fully paid for" at the brokerage house.

There is a lottery on artificial shares when it comes to dividends or voting rights, the latter are forfeited by the investor, and the former are replaced with a substitute payment which has different tax consequences for the investor.

Go right ahead. Draw and quarter those crooked brokers and their Chicago options in court. I used to work in that industry, and now they have put a price on my head.

 

[justinacolmena]

That's one of the difficulties in regulating the stock market. Real estate or land is tangible: assuming you own it free and clear, you can build on it or live on it and no one should question your ownership of or evict you from it, even if its fair market value falls.

Stock in a corporation is intangible. You can look at your broker statement or stock certificates and they will tell you what it's worth currently, but if you lose your ownership of it, well, you just lost your money in the stock market and others mock you because their money is "professionally managed" safe and secure in their 401(k) accounts and they were "obedient" to their Baptist-preacher financial advisers.

So SIPC is not for individual investors.

 

[Natural Citizen]

The market is distorted. Stocks and Bonds are way too high.

Be careful.

I think major correction coming. Historic even. 40-50% bust? Could be, wabbits. Could be...

 

[justinacolmena]

major correction coming. Historic even. 40-50%

Easily. The "correction" which the market really needed, namely prison time, was too slow in coming.

 

[Toddsterpatriot]

major correction coming. Historic even. 40-50%

Easily. The "correction" which the market really needed, namely prison time, was too slow in coming.

Who needed prison time?