Traditionally, options are traded by unsophisticated, impatient investors who are lured by the potential for huge profits with a small capital outlay. Interestingly, the actions of these investors provide excellent signals for market tops and bottoms. Interpretation A Call gives an investor the right to purchase 100 shares of stock at a pre-determined price. Investors who purchase Calls expect stock prices to rise in the coming months. Conversely, a Put gives an investor the right to sell 100 shares of stock at a pre-set price.
Investors purchasing Puts expect stock prices to decline.
Conversely, lower readings indicate high Call volume and thus bullish expectations. The arrows certainly show that investors are buying Puts when they should be buying Calls, and vice versa. Contact Copyright 2000 Equis International.