CBOE Put/call data: Final Verdict

Corona Del Mar, CA


Hey Friend, 


In the last update, I loaded up AAII sentiment data into The Boss...and it was a complete dud.


Not predictive.


I'm not surprised because someone's opinion is worth way less than how much money they have on the line.


So I figured put/call ratios and such would have some predictive power since it's based on actual trading.

The fellas loaded up the data, and I got to "work"


I use the term "work" loosely because it only took me 5 minutes of editing a TAP Template to get started.

I ended up running 10 tests where The Boss programmed itself in C code.

If The Boss isn't finding something in 10 tests, there isn't an edge.  Once again, price data (open, high, low, close, volume, time) easily beat put/call data.


It wasn't even close.


Just to be sure I even combined sentiment with the put/call data. Nada.


Couldn't beat price.


By comparison, 100% of the time, the new TAP data beats price/volume data.


Man...I can't tell you how many times I've heard some "guru" use put/call data as part of their evidence as to why the market should move up or down.


Now that I think about it, these are the same folks that draw lines on charts and try to get into the minds of Fed board members. I stopped doing that 20+ years ago because I went broke.


So there you have it...another Wall Street sacred cow has been slaughtered.

Trade smart,

Dan "Prince of Proof" Murphy


Disclaimer: The results listed herein are based on hypothetical trades. Plainly speaking, these trades were not actually executed. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under (or over) compensated for the impact, if any, of certain market factors such as lack of liquidity. You may have done better or worse than the results portrayed.

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