Constructing put-call open-interest regime filters

Treat crowded options flow as a construction problem

A conventional options-activity gauge is call volume divided by put volume. It is usually smoothed over about 10 sessions because single-session readings swing sharply. In the archive workflow that multi-session average was a put-call-ratio used to label crowded options-flow regimes rather than to time a single bar.

Test volume against open interest

Pairing each side’s volume with its open interest produces a call-put-trin: call volume relative to call open interest, divided by put volume relative to put open interest. Open-interest-analysis uses outstanding call and put contracts to test whether volume is new positioning or liquidation of existing contracts. A 10-session version of that TRIN therefore contains both volume and open interest, unlike a volume-only call/put average.

When the window is computed by summing each series first and then taking the ratios, high-activity sessions receive more weight than quiet ones.

Ask a second reading to agree

Option-ratio extremes were treated as more useful when they coincided with independent survey extremes. They were not presented as standalone pinpoint timers. A contrarian-strategy in this workflow fades a consensus only after options flow, surveys, and a related market agree that uncommitted demand or supply looks exhausted. Cross-market-confirmation checks whether another point on the same curve or a related market prints an extreme the first market did not.

After late-1989 equity weakness, bond futures held a roughly 1.5-point range into late December while bullish survey readings stayed in the mid-50s to low 60s following a mid-November 10-day TRIN near 1.40. When bond TRIN and surveys in November-December 1989 fell short of an ideal sell extreme, short-rate contracts still printed bullish extremes, adding a curve-based context layer.

An equity-index 10-day TRIN peak in August 1989 lined up with a peak in the advance/decline line, but later tops and lows did not print equally aggressive TRIN extremes.

Label a refused washout as a regime

Sentiment-capitulation is a survey or flow washout in which bullish readings collapse after a price break instead of holding or rising. After a near-vertical nine-point January decline, a 10-day TRIN of 0.56 on 7 February 1990 did not bring that washout: bullish readings stayed near 55% and rose to 60% in the next two-week pause. That held bid is latent-demand, uncommitted buying still able to absorb supply after a rally or a pause.

A later TRIN trough near 0.58, including a one-day 0.46 on 2 May 1990 at a June-bond print of 88.10, arrived with about 41% bullish sentiment. Within three weeks survey bullishness was back near 70%.

In gold, a 10-day TRIN near 1.54 after a strong advance, then 1.50 in late January, coincided with a four-week sentiment average near 80%. Gold TRIN turns were described as shorter-horizon than those in bonds or stocks, and a later May 10-day TRIN printed 0.35.