Loading ...The (lately not-so-mighty) $CPCI stirs tonight!
The CBOE’s final index put/call ratio value came out to 1.83, which is clearly above the upper threshold of 1.55 (6-mo.avg. + 1 std.dev.) and is thus signaling a contrarian long entry for tomorrow morning. My weapon of choice are SPY Dec’09 107. calls.
If you’ve been following along, you’ll know that this simple system based on the CBOE’s put/call ratio has been trading wins and losses for the last couple months (after a summer-long winning streak), with the results comparable to a simple coin flip.
That being said, I like this trade on several levels…not least because should the recent market paradigm hold up, it looks to be timing a ‘dip buy‘ perfectly.
It also jives well with the fact that I sold off a bunch of winning put positions today, finishing up another 2% or so and finally climbing out of the hole that I dug myself at the beginning of the month (when I failed to place protective stops on similarly bearish positions):
After heavy trading the last couple days, I plan on taking it easy with just a few new buys lined up (and with just roughly half the # of total positions):
- Bullish:Â CAL (@12.91), GME (@25.25)
- Bearish:Â BUCY (@46.), HON (@36.83), KR (@23.25), SRS – calls (@10.25)
Have you thought about putting a filter on the system so it only takes long trades when the overall trend is up and shorts when the overall trend is down?
Yeah, but that would go against the whole idea of keeping things as simple as possible.
That would open up a whole new can of worms…such as:
- How do you define ‘trend’? Looking at the last few days, it’s down, but looking at the last few months, it’s up.
- If the system is meant to be contrarian, do you trade with the trend or against it?
Another good day ovah heah…looking to book some profits near the close…
Namely: ACI, CREE, FAS, FCX, SRS