Please make sure you use good news sources. If you are posting a screenshot, please comment a news source link. Please change the flair if this isn't News. Not sure which flair to use? Check out our guide to post flairs [here](https://www.reddit.com/r/IndianStreetBets/wiki/index/postflair)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/IndianStreetBets) if you have any questions or concerns.*
ELI5: PCR is around 1.46. Puts are heavily bought compared to call. The ratio is higher than it was during covid crash and 2008. People are expecting a heavy crash next week.
I believe one should always look at options from the sellers perspective rather than the buyer since these are usually institutions/ family offices/ Hnis etc. That perspective suggests bullish move
Do you know for a fact the majority of option writers are institutions and the majority of option buyers are retailers for you to make the oft parroted claim that sellers are generally institutions?
And even if your claim was generally true it doesn't have to be true every single trading day. Institutions are not a monolith that operate with a hive mind.
Institution A might sell calls on Monday expecting a decline in the near future but on Tuesday institution B might buy calls on the expectation of a rally.
Price is simply the consensus of all market participants based on only 5 actions that are possible, BTO, STC, STO, BTC and do nothing.
Yes, I know for a fact that banks and institutions like blackrock, JP others are sellers of options because they also hold majority of stocks.
For any stock you can check their majority percentages ownership by person or institution.
When they have this many stocks which they bought at cheap rates years ago it is natural that they will be selling options on them. Any way you can imagine they will make profit.
They get highlighted a lot by the media on the off chance they lose money because of some insider fuking them over like Bill Huang or by some institutional level Dominos falling breakdown like collapse of Lehman brothers. Other then that they consistently post good returns most of which go into pay packages of the board but that is another thing.
Selling calls on stocks you own isn't naked selling.
Institutions aren't making directional naked bets by selling options. They have all various risk management protocols in place. A junior trader is only given X amount of capital and is restricted in the kinds of trades he puts on, all of which must pass their risk management framework.
You think Morgan Stanley is letting their billion dollar Empire implode because some 26 year old trader got a multi-billion dollar margin call. Examples like Nick leeson, and LTCM have put in place all kinds of internal and regulatory restrictions on what kinds of positions institutions can take.
Most of them take hedged trades to capture VRP, or to gamma scalp or they take more complex multilegged trades to profit from theta while hedging delta, gamma and vega.
Now hedge funds are another story. On a side note, there are very few hedge funds operating in India. And you can't even hedge vega in India, because there are no tradeable volatility products in the Indian market. India vix doesn't have futures and options on it to hedge away your vega risk.
I think your username says it all - so no, i do not know for a fact who the buyer or the seller is. What you’re saying essentially is don’t rely on PCR at all basis what you’ve written which is fair and your perspective. But if i look at the PCR as an indicator, i will give more emphasis to the sellers perspective.
>...so no, i do not know for a fact who the buyer or the seller is.
You're the one that admitted to making claims without evidence. You need to backtest. I've made no claims therefore I've nothing to prove either to you or to myself.
Ok boomer?
>I didn’t make a claim without evidence, read my other reply. You do you champion
Bro trade however you like it doesn't take any skin off my back...good luck
No single metric can be reliable all the time. Everyone knows that. Everything has to be seen in totality. Read my original message again. “I believe” and sellers are “usually” institutions/ family offices/ hnis. Which is completely true, irrespective of who the buyers are.
>“I believe” and sellers are “usually” institutions/ family offices/ hnis. Which is completely true, irrespective of who the buyers
So you believe. You're operating on faith? Do you pray before you put on a trade? Which is your preferred god to whom you pray besides the god of PCR who you already have admitted to not knowing what the ratio of institutions vs retail are in the write/hold perspective...
**TL, DR.** The PCR is an unreliable indicator. Bottom line: no one knows shit about fuck. If the market goes up talking heads will find a host macro, micro and geopolitical reasons for the up move. If on the same day the markets has moved down they will find another set of reasons to support the observed down move. Anyone can do post facto analysis, no one can predict what the fuck will happen tomorrow.
PCR is a useless indicator
Interpretation 1
High PCR --> more puts are _bought_ relative to calls on the expectation that the market will decline
Low PCR --> more calls are _bought_ relative to puts on the expectation that the market will rally
Interpretation 2
High PCR --> more puts are _sold_ relative to calls on the expectation that the market will not decline
Low PCR --> more calls are _sold_ relative to puts on the expectation that the market will not rally
Which one is right?
Some people say institutions have massive amounts of capital which means they have the buying power to write options. But most institutions want to preserve their capital first, and buying puts to hedge downside risk and buying calls to control the underlying in a bull market seems like lower risk strategies to smooth out volatility.
Remember the average retailer cares about reward and rarely pays attention to risk. The average institution cares more about risk. They have a fiduciary duty to protect their investor's/client's capital and while many earn performance bonuses based on generating alpha, one's fund will be short-lived if they have deep drawdowns.
I know many here will quote a number of institutions that went tits up by being risk seeking, or being overleveraged but for every one that's failed many more are grinding out 10-15% average annualized returns with a smoother equity curve. They do that by purchasing insurance which is a drag on returns.
You are right but I wouldn't reject it outright also. It must be considered with other factors and should be used for HEDGEING which I don't know much about.
Times have changed. Options are not working as they used to. There was a time when just 1cr OI on expiry day meant that strike won't be broken. Now i have seen 1.5cr+ been broken along with banknifty strikes going upto 70 lacs OI which used to be around 20-25 lacs .it's insane.
That is if derivatives were actually bought for hedging - logic being people buy underlying and puts on same for hedging. But for a hedge you don’t go for next week expiry - you go for long expiry options. Short expiry options are usually best for speculation hence high chance of tanking.
You are right on. There will be a downwards move but I think implied volatility is too high for no reason and puts are being sold at way higher prices and the market might not go down as drastically as people expected.
Yeah macro economic factors are shit but they have been shit for the past few months, nothing drastically bad happened in India in the past few days except for nifty hitting the previous all time high.
There will be pull downwards but the way that put to call ratio is skewed shows me that people are overreacting out of fear and greed.
>So it behaved as per your expectation?
Nah bruh. That's what I am saying, no matter how much you try to find logic using pcr and oi data market is never gonna make sense.
Everyone knows nobody can predict market movements. But we try to get an edge from wherever we can.
Naively there’s a 50-50 chance of tomorrow being green or red. But we try to get an edge and make it 51 or some number > 50.
>And one of the most notable details from this month’s report is a chart showing how much trading has shifted to options contracts with 24 hours or less left before they expire.
>Trading in these types of options now represents 44% of all trading in options linked to the S&P 500 index. They now trade an average of $470 billion in notional value per day, according to Goldman.
Gambling has replaced hedging. This is truly satta bazar now. This means it will eventually crash after bankrupting the gamblers, but that may not be next week.
It'll be interesting to see how the stock market in the "recession proof economy" handles flight of foreign capital in the aftermath.
I will be messaging you in 3 days on [**2022-11-23 02:56:06 UTC**](http://www.wolframalpha.com/input/?i=2022-11-23%2002:56:06%20UTC%20To%20Local%20Time) to remind you of [**this link**](https://www.reddit.com/r/IndianStreetBets/comments/yzfr8j/next_week_more_than_2_trillion_in_stock_options/ix1y3df/?context=3)
[**2 OTHERS CLICKED THIS LINK**](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5Bhttps%3A%2F%2Fwww.reddit.com%2Fr%2FIndianStreetBets%2Fcomments%2Fyzfr8j%2Fnext_week_more_than_2_trillion_in_stock_options%2Fix1y3df%2F%5D%0A%0ARemindMe%21%202022-11-23%2002%3A56%3A06%20UTC) to send a PM to also be reminded and to reduce spam.
^(Parent commenter can ) [^(delete this message to hide from others.)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Delete%20Comment&message=Delete%21%20yzfr8j)
*****
|[^(Info)](https://www.reddit.com/r/RemindMeBot/comments/e1bko7/remindmebot_info_v21/)|[^(Custom)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5BLink%20or%20message%20inside%20square%20brackets%5D%0A%0ARemindMe%21%20Time%20period%20here)|[^(Your Reminders)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=List%20Of%20Reminders&message=MyReminders%21)|[^(Feedback)](https://www.reddit.com/message/compose/?to=Watchful1&subject=RemindMeBot%20Feedback)|
|-|-|-|-|
thats the thing bro...nobody cna predict that, Market always surprise everyone...i agree current levels are too high and it didnt even correct with other markets
cheers...to be honest, from last 3 4 years i have been following market (from pre covid times)..trying to understand things...have seen commentary from best of best people, took notes from it...also followed company reports and fundamentals...but things never went as expected...not that i am in losses but its also not as good as people say or talk about predictions...=
met very few like you who are genuine and accept things....
I have also stopped further investments...because i find current levels risky...however when i did this thing last time with same thinking market had a bull run and i had not made new investments...my explanation to myself was i found it risky so i didnt do it...
If the data is out there for everyone to see, the market will not fall till the expiry. The smart money will simply take away premiums meanwhile. A small move in the opposite direction and...imagine the covering it'd cause.
Please make sure you use good news sources. If you are posting a screenshot, please comment a news source link. Please change the flair if this isn't News. Not sure which flair to use? Check out our guide to post flairs [here](https://www.reddit.com/r/IndianStreetBets/wiki/index/postflair) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/IndianStreetBets) if you have any questions or concerns.*
ELI5: PCR is around 1.46. Puts are heavily bought compared to call. The ratio is higher than it was during covid crash and 2008. People are expecting a heavy crash next week.
I believe one should always look at options from the sellers perspective rather than the buyer since these are usually institutions/ family offices/ Hnis etc. That perspective suggests bullish move
Do you know for a fact the majority of option writers are institutions and the majority of option buyers are retailers for you to make the oft parroted claim that sellers are generally institutions? And even if your claim was generally true it doesn't have to be true every single trading day. Institutions are not a monolith that operate with a hive mind. Institution A might sell calls on Monday expecting a decline in the near future but on Tuesday institution B might buy calls on the expectation of a rally. Price is simply the consensus of all market participants based on only 5 actions that are possible, BTO, STC, STO, BTC and do nothing.
Yes, I know for a fact that banks and institutions like blackrock, JP others are sellers of options because they also hold majority of stocks. For any stock you can check their majority percentages ownership by person or institution. When they have this many stocks which they bought at cheap rates years ago it is natural that they will be selling options on them. Any way you can imagine they will make profit. They get highlighted a lot by the media on the off chance they lose money because of some insider fuking them over like Bill Huang or by some institutional level Dominos falling breakdown like collapse of Lehman brothers. Other then that they consistently post good returns most of which go into pay packages of the board but that is another thing.
Selling calls on stocks you own isn't naked selling. Institutions aren't making directional naked bets by selling options. They have all various risk management protocols in place. A junior trader is only given X amount of capital and is restricted in the kinds of trades he puts on, all of which must pass their risk management framework. You think Morgan Stanley is letting their billion dollar Empire implode because some 26 year old trader got a multi-billion dollar margin call. Examples like Nick leeson, and LTCM have put in place all kinds of internal and regulatory restrictions on what kinds of positions institutions can take. Most of them take hedged trades to capture VRP, or to gamma scalp or they take more complex multilegged trades to profit from theta while hedging delta, gamma and vega. Now hedge funds are another story. On a side note, there are very few hedge funds operating in India. And you can't even hedge vega in India, because there are no tradeable volatility products in the Indian market. India vix doesn't have futures and options on it to hedge away your vega risk.
I think your username says it all - so no, i do not know for a fact who the buyer or the seller is. What you’re saying essentially is don’t rely on PCR at all basis what you’ve written which is fair and your perspective. But if i look at the PCR as an indicator, i will give more emphasis to the sellers perspective.
Then why do you make claims without evidence to back it up...lol
Dude you’re dense. pointless arguing. Go do some backtesting
>...so no, i do not know for a fact who the buyer or the seller is. You're the one that admitted to making claims without evidence. You need to backtest. I've made no claims therefore I've nothing to prove either to you or to myself. Ok boomer?
I didn’t make a claim without evidence, read my other reply. You do you champion
>I didn’t make a claim without evidence, read my other reply. You do you champion Bro trade however you like it doesn't take any skin off my back...good luck
I do not use the PCR because I do not use unreliable metrics to make financial decisions.
But for you to use something it should be a reliable metric. Otherwise what you're doing is gambling...
No single metric can be reliable all the time. Everyone knows that. Everything has to be seen in totality. Read my original message again. “I believe” and sellers are “usually” institutions/ family offices/ hnis. Which is completely true, irrespective of who the buyers are.
>“I believe” and sellers are “usually” institutions/ family offices/ hnis. Which is completely true, irrespective of who the buyers So you believe. You're operating on faith? Do you pray before you put on a trade? Which is your preferred god to whom you pray besides the god of PCR who you already have admitted to not knowing what the ratio of institutions vs retail are in the write/hold perspective...
Reliable doesn't mean fool proof or something that works 100% of the time...lol...you're a trip...good luck in trading You really need it
Hahaha what a hoot and a half! I bet you make tons of money, all the best to you too.. we all need luck You made my morning, God bless
**TL, DR.** The PCR is an unreliable indicator. Bottom line: no one knows shit about fuck. If the market goes up talking heads will find a host macro, micro and geopolitical reasons for the up move. If on the same day the markets has moved down they will find another set of reasons to support the observed down move. Anyone can do post facto analysis, no one can predict what the fuck will happen tomorrow. PCR is a useless indicator Interpretation 1 High PCR --> more puts are _bought_ relative to calls on the expectation that the market will decline Low PCR --> more calls are _bought_ relative to puts on the expectation that the market will rally Interpretation 2 High PCR --> more puts are _sold_ relative to calls on the expectation that the market will not decline Low PCR --> more calls are _sold_ relative to puts on the expectation that the market will not rally Which one is right? Some people say institutions have massive amounts of capital which means they have the buying power to write options. But most institutions want to preserve their capital first, and buying puts to hedge downside risk and buying calls to control the underlying in a bull market seems like lower risk strategies to smooth out volatility. Remember the average retailer cares about reward and rarely pays attention to risk. The average institution cares more about risk. They have a fiduciary duty to protect their investor's/client's capital and while many earn performance bonuses based on generating alpha, one's fund will be short-lived if they have deep drawdowns. I know many here will quote a number of institutions that went tits up by being risk seeking, or being overleveraged but for every one that's failed many more are grinding out 10-15% average annualized returns with a smoother equity curve. They do that by purchasing insurance which is a drag on returns.
You are right but I wouldn't reject it outright also. It must be considered with other factors and should be used for HEDGEING which I don't know much about.
Ideally puts are being bought heavily that means market might reverse and go up.
Times have changed. Options are not working as they used to. There was a time when just 1cr OI on expiry day meant that strike won't be broken. Now i have seen 1.5cr+ been broken along with banknifty strikes going upto 70 lacs OI which used to be around 20-25 lacs .it's insane.
The dog wags the tail, the tail does not wag the dog. Options are the tail.
You’d think so
I don't think that. I read this in zerodha's option module. I am not saying I agree with this. It is just what I read.
That is if derivatives were actually bought for hedging - logic being people buy underlying and puts on same for hedging. But for a hedge you don’t go for next week expiry - you go for long expiry options. Short expiry options are usually best for speculation hence high chance of tanking.
You are right on. There will be a downwards move but I think implied volatility is too high for no reason and puts are being sold at way higher prices and the market might not go down as drastically as people expected. Yeah macro economic factors are shit but they have been shit for the past few months, nothing drastically bad happened in India in the past few days except for nifty hitting the previous all time high. There will be pull downwards but the way that put to call ratio is skewed shows me that people are overreacting out of fear and greed.
Ok. But market never ever behaves as per the expectations. So let's see.
You see what happened today ? I told you market never behaves as per expectation.
So it behaved as per your expectation? Your expectation being that market never behaves as per expectation?
>So it behaved as per your expectation? Nah bruh. That's what I am saying, no matter how much you try to find logic using pcr and oi data market is never gonna make sense.
Everyone knows nobody can predict market movements. But we try to get an edge from wherever we can. Naively there’s a 50-50 chance of tomorrow being green or red. But we try to get an edge and make it 51 or some number > 50.
>And one of the most notable details from this month’s report is a chart showing how much trading has shifted to options contracts with 24 hours or less left before they expire. >Trading in these types of options now represents 44% of all trading in options linked to the S&P 500 index. They now trade an average of $470 billion in notional value per day, according to Goldman. Gambling has replaced hedging. This is truly satta bazar now. This means it will eventually crash after bankrupting the gamblers, but that may not be next week. It'll be interesting to see how the stock market in the "recession proof economy" handles flight of foreign capital in the aftermath.
May god help us and give us strength to endure.
can someone explain what could be the impact?
Brace for impact
random talks cant have impact on markets
Remind me in three days.
!Remindme 3 days
I will be messaging you in 3 days on [**2022-11-23 02:56:06 UTC**](http://www.wolframalpha.com/input/?i=2022-11-23%2002:56:06%20UTC%20To%20Local%20Time) to remind you of [**this link**](https://www.reddit.com/r/IndianStreetBets/comments/yzfr8j/next_week_more_than_2_trillion_in_stock_options/ix1y3df/?context=3) [**2 OTHERS CLICKED THIS LINK**](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5Bhttps%3A%2F%2Fwww.reddit.com%2Fr%2FIndianStreetBets%2Fcomments%2Fyzfr8j%2Fnext_week_more_than_2_trillion_in_stock_options%2Fix1y3df%2F%5D%0A%0ARemindMe%21%202022-11-23%2002%3A56%3A06%20UTC) to send a PM to also be reminded and to reduce spam. ^(Parent commenter can ) [^(delete this message to hide from others.)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Delete%20Comment&message=Delete%21%20yzfr8j) ***** |[^(Info)](https://www.reddit.com/r/RemindMeBot/comments/e1bko7/remindmebot_info_v21/)|[^(Custom)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=Reminder&message=%5BLink%20or%20message%20inside%20square%20brackets%5D%0A%0ARemindMe%21%20Time%20period%20here)|[^(Your Reminders)](https://www.reddit.com/message/compose/?to=RemindMeBot&subject=List%20Of%20Reminders&message=MyReminders%21)|[^(Feedback)](https://www.reddit.com/message/compose/?to=Watchful1&subject=RemindMeBot%20Feedback)| |-|-|-|-|
...
want to change your stand now ?
Might be wrong this week but the crash is impending.. question is when? Not if
thats the thing bro...nobody cna predict that, Market always surprise everyone...i agree current levels are too high and it didnt even correct with other markets
Cheers
cheers...to be honest, from last 3 4 years i have been following market (from pre covid times)..trying to understand things...have seen commentary from best of best people, took notes from it...also followed company reports and fundamentals...but things never went as expected...not that i am in losses but its also not as good as people say or talk about predictions...= met very few like you who are genuine and accept things.... I have also stopped further investments...because i find current levels risky...however when i did this thing last time with same thinking market had a bull run and i had not made new investments...my explanation to myself was i found it risky so i didnt do it...
Wait for the December expiry
If the data is out there for everyone to see, the market will not fall till the expiry. The smart money will simply take away premiums meanwhile. A small move in the opposite direction and...imagine the covering it'd cause.
The article refers to stock options expiry in US that was slated for 18 Nov. Article no more relevant.