Given the numbers on the Morningstar page, I should be able to compute:

- A simple put/call ratio: total open interest of puts over total open interest of calls.
- (Here's where my own ideas start) A put/call ratio where the open interest is weighted according to time until expiration—i.e., near-term options are given more weight since (maybe) they represent traders who have a larger stake in the game and thus are paying more attention to whether their bet will pay off.
- A similar ratio, but with the open interest weighted by how far the strike price is out of the money.
- Change in the price of the option and of the underlying stock. (Call these
**delta-o**and**delta-s**to avoid confusion with the options greek called "delta.")

The last should be graphed over time. There's a nice module in CPAN already to build 2-D graphs (line charts, bar charts, the usual) given an array of data, and output them as image files ready to be tagged on a simple web page like I did in the previous entry. But you have undoubtedly already noticed, Careful Reader, that there are really two dependent variables in the graph I just described. (Yes, the difference and the ratio between delta-o and delta-s are interesting, but the individual stats are also interesting in themselves.) This calls for a three-dimensional graph. I don't see any relevant library on CPAN, but I'm sure a little digging will turn up something I can adapt. (In fact, I already have the book

*Perl Hacks*, which has a nice explanation of how to do bitmapped graphics in a window with SDL; so all I really need, if I'm recalling Computer Graphics 101 correctly, are the equations for a projection of a three-dimensional point onto a two-dimensional plane from a particular relative viewpoint). Having done this, I've got another idea for which a 3-D graph—and preferably a dynamic one that you can "fly around" and look at from all sides—would be not just nice to have but mandatory: distance out of the money (y) and price (z) versus time to expiration (x). If the points are colored or shaded appropriately to indicate the sign and magnitude of delta-o, then a large solid-colored area would be a tipoff that a certain set of options with a similar strike price and time until expiration have gone up or down in asking price—quite possibly a significant leading indicator of the price trend of the underlying security.

The analysis of options is always—and this is a truism, but a deep and important one—complicated by the fact that for every buyer of options, there's also a seller. The line "Most options expire worthless" is often given as an argument that options buyers are mostly ignorant speculators whose bets don't pan out. I don't buy that. (If that were the case, the put-call ratio is universally interpreted in reverse; we ought to expect that the buyers of puts are mostly wrong in their predictions, so the price of the underlying stock will go up; and the inverse for calls.) I'd bet that most options are in fact both bought and sold not in order to speculate on the options themselves but in order to hedge a trade of the underlying securities. If that's the case, then something would be wrong if the options mostly

*didn't*expire worthless. Most people rarely if ever make claims against their car insurance, too.

(Hey, there's even already a Perl module to do Black-Scholes options pricing...)

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