Wouldn't it be great if we had a crystal ball that told us the movement direction of a stock or an option in the near future? My partner Mike always says, let me know the movement of a stock for only the next five minutes and I'll become wealthier than Warren Buffet!. How about this? Suppose there was a newspaper that came out in the evening and gave you that movement on certain stocks and or options the next morning!
OK. I hear all you naysayers yelling that there is no such thing, so get off the subject.
Well, not so fast my skeptic minded friends. I don't blame you for being skeptical when it comes to stock and option trading. But while it is true that there is no such thing as a crystal ball or a newspaper that gives futures results, there are valuable indicators that stock and option traders have at their fingertips that can substantially increase one's odds of making a winning trade. I am not talking about using charts to find support and resistance points, or moving day average cross-overs, or MACD Indicators, or anything like that. I am talking about something that is easier to read than all those indicators.
So, you ask, then what is it?
I will tell you, but before I do, let me say this: This indicator is so simple you might have the tendency to throw it aside and say --Big Deal! But read this entire article with an open mind then test it out on a number of paper trades before you dismiss the idea. I think you will find it more like a crystal ball than you may now believe is possible.
OK here is.
It is the Put to Call ratio. This is a ratio between all of the option volume for the Puts versus the Calls of a particular stock for the current month's expiration. You can also check out the following month's expiration to see if the Put/Call ratio is similar. This next part is very important! The Put/Call ratio is of particular interest on stocks that are announcing their earnings after the market closes on a particular day or in the morning prior to the open. Disregard any stocks on earnings announcement that happen during trading hours.
OK. I hear all you naysayers yelling that there is no such thing, so get off the subject.
Well, not so fast my skeptic minded friends. I don't blame you for being skeptical when it comes to stock and option trading. But while it is true that there is no such thing as a crystal ball or a newspaper that gives futures results, there are valuable indicators that stock and option traders have at their fingertips that can substantially increase one's odds of making a winning trade. I am not talking about using charts to find support and resistance points, or moving day average cross-overs, or MACD Indicators, or anything like that. I am talking about something that is easier to read than all those indicators.
So, you ask, then what is it?
I will tell you, but before I do, let me say this: This indicator is so simple you might have the tendency to throw it aside and say --Big Deal! But read this entire article with an open mind then test it out on a number of paper trades before you dismiss the idea. I think you will find it more like a crystal ball than you may now believe is possible.
OK here is.
It is the Put to Call ratio. This is a ratio between all of the option volume for the Puts versus the Calls of a particular stock for the current month's expiration. You can also check out the following month's expiration to see if the Put/Call ratio is similar. This next part is very important! The Put/Call ratio is of particular interest on stocks that are announcing their earnings after the market closes on a particular day or in the morning prior to the open. Disregard any stocks on earnings announcement that happen during trading hours.





