If you've been around a while... you know all about this series. Approximately one entry per month where we look at the way puts and calls are trading on the ETF SPY (a S&P 500 ETF), and use those to divine the future based on the disparity between those prices and where the stock is trading today. Today's entry is based on data as of the close on 5/15/2013.
Does This System Have Predictive Value?
I'm going to go with... probably not. Still, if a failed experiment about market predictions missed to the low side so often, perhaps you can use this data to your advantage? Hear me out - let's say that there is a trend here, and puts and calls tend to imply closing prices on the low side... that would mean you've got a chance there is underpricing for more optimistic trades.
Here's what we've got this month:
And for puts...
Too Hard to Read?
Don't worry, I've got you covered. Here's the above data in chart form (multiple by 10 to normalize the the S&P):
| 2013-05 | 2013-06 | 2013-07 | 2013-08 | 2013-09 | 2013-12 | 2014-01 | 2014-03 | 2014-06 | 2014-12 | 2015-01 | 2015-12 | |
| Put High | 166 | 166 | 168 | 167.021 | 166.143 | 160 | 162 | 166.113 | 165.725 | 170.188 | 169.34 | 177.5 |
| Put Medium | 165.162 | 163 | 162.224 | 162.192 | 160 | 152.5 | 152.908 | 156 | 154.83 | 161 | 142.5 | 160 |
| Put Low | 162 | 158 | 152 | 154 | 154.09 | 140.262 | 131.172 | 141.138 | 134.73 | 131.235 | 126.22 | 121.354 |
| 2013-05 | 2013-06 | 2013-07 | 2013-08 | 2013-09 | 2013-12 | 2014-01 | 2014-03 | 2014-06 | 2014-12 | 2015-01 | 2015-12 | |
| Call High | 168 | 170 | 171 | 172.833 | 172.75 | 179 | 170 | 179.172 | 175.964 | 180.503 | 190 | 204.853 |
| Call Medium | 166 | 166 | 166 | 167.221 | 167.103 | 166.137 | 165 | 170 | 164.091 | 164.934 | 163.72 | 175 |
| Call Low | 165 | 163 | 161.119 | 164.768 | 163.077 | 160.231 | 158.237 | 162.5 | 150.968 | 141.28 | 138 | 155 |
Good Luck!
Well, I'll still be logging these predictions so I can eventually follow up on the predictions that I've derived from puts and calls... but I don't look at this experiment as a reliable one for predicting market closes. Nope... like I said above, I'm looking at it as a potential exploitable.
Let me know what you think... or if you can think of a way to scale or factor this data to improve predictive value... or, maybe, to predict where you can make money off the inefficiencies!
