Using Put Volume Indicators to Trade

Bollinger’s Put Volume Indicator (PVI) has great value for option traders. Here the trader uses put option volume history, the entire CBOE (www.cboe.com) put volume for the day. The indicator is equal to the 10-day moving average of put volume. If the ratio rises, it indicates that puts and bearish bias are on an increase. EX: A reading of 2.00 tells us that the day’s put volume is two times greater than average. If the reading is, in turn, low, it means there is high bullishness, or complacent. Some traders also use put call ratios: CBOE Put Call Ratios - another way to study excessive fear and greed in the marketplace. Calls are typically higher volume on this exchange, but when the put to call ratio rises it means buying is on the rise. Readings of 1.25 or greater reflect oversold. When the indicator drops below .50, it shows bullish sentiment is still quite high, and overbought, and likely to shift bias.